Delush Limited, a wine manufacturing company, has a $31$ December financial year end. The following information is relevant for the year ended $31$ December $2023$:

Raw materials balance at $1$ January $2023(100$ bags$)$ N$$220000$

Finished goods balance $(40$ barrels$)$ at $1$ January $2023$ N$$140000$

Invoice price of raw materials purchased $($see note $1$ below$)$ N$$3630000$

Refundable import duties N$$187000$

Direct labour N$$900000$

Variable manufacturing costs N$$1510000$

Fixed manufacturing overheads N$$1200000$

Note $1$: Raw materials $(1200$ bags$)$ were purchased on $1$ January $2023$ from a supplier who granted settlement terms of $24$ months to Delush Ltd $($payment is due on $31$ December $2024).$ The time value of money is considered material, and an appropriate market interest rate is $10\%$ per annum.

One bag of raw materials produces a barrel of wine. $1400$ barrels of wine were

manufactured during the year. The budget indicated that normal production would be $1500$ barrels. $1300$ barrels were sold during the year.

Closing stock at $31$ December $2023$ was:

Raw materials $(100$ bags$)$ N$$???$

Work in progress N$ Nil

Finished goods $(140$ barrels$)$ N$$??$

Delush Ltd makes use of the first$-$in$-$first$-$out $($FIFO$)$ method for all classes of inventory.

The current sales price of finished goods is N$$4900$ per barrel and selling costs amount to N$$120$ per barrel. The selling price is expected to be decreased by $5\%$ due to an entrant of a new competitor and all costs are expected to increase by $7\%$ in the next year due to inflation.

REQUIRED:

a$)$ Explain the accounting treatment of by products in accordance with IAS $2$

$($Inventories$).(3)$

b$)$ Prepare the following notes in accordance with the International Financial Reporting

Standards $($IFRS$)$ to be presented in the financial statements of Delush Limited for

the year ended $31$ December $2022$:

I. Profit before tax $(2)$

II$.$ Inventory $(20)$