Topic07 Questions - AF3110 Intermediate Accounting 1...

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1 AF3110 Intermediate Accounting 1 2009/10Semester 2 Topic 7 Question 1 (Chapter 11 Q8) Answer the following in accordance with HKAS 2 Inventories : (a) HKAS 2 requires inventories to be valued at the lower of the following amounts: cost, or net realisable value. How would you arrive at the cost of finished goods stock in a manufacturing company? (b) The following information relates to Unipoly Ltd, a manufacturer of can openers, for the year ended 31 May 20X4 $ Direct material cost of can opener per unit 1 Direct labour cost of can opener per unit 1 Direct expense of can opener per unit 1 Production overheads per year 600,000 Administrative overheads per year 200,000 Selling overheads per year 300,000 Interest payments per year 100,000 There were 250,000 units of finished goods at the year end. You may assume that there were no finished goods at the start of the year and no work-in-progress. The normal annual level of production is 750,000 can openers, but in the year ended 31 May 20X4, only 450,000 were produced because of a labour dispute. Required: Calculate the cost of finished goods in accordance with HKAS 2 . Question 2 In an annual audit of Jan Matejko Company at 31 December, 2008, you find the following transactions near the closing date. 1. A special machine, fabricated to order for a customer, was finished and specifically segregated in the back part of the shipping room on 31 December 2008. The customer was billed on that date and the machine excluded from inventory although it was shipped on 4 January 2009. 2. Merchandise costing $2,800 was received on 3 January 2009, and the related purchase invoiced recorded 5 January. The invoiced showed the shipment was made on 29 December 2008, f.o.b. destination.
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2 3. A packing case containing a product costing $3,400 was standing in the shipping room when the physical inventory was taken. It was not
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This note was uploaded on 10/20/2010 for the course AD abc123 taught by Professor Cat during the Summer '09 term at City University of Hong Kong.

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Topic07 Questions - AF3110 Intermediate Accounting 1...

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