1、Accounting English會計英語Unit 8 IAS2 Inventories 存貨Key termsnOpening inventory 期初存貨期初存貨nClosing inventory 期末存貨期末存貨nPurchase cost 采購成本采購成本nCost of convention 加工成本加工成本nTrade discount 商業折扣商業折扣nRaw materials 原材料原材料nWork in the process 半成品半成品nFinished goods 完成產品完成產品nSpecific identification 具體辨認法具體辨認法nFIFO (

2、first in first out) 先進先出法先進先出法Key termsnLIFO (last in first out) 后進先出法后進先出法nAVCO (average weighted cost) 加權平均加權平均法法nPeriodic weighted average 周期加權平均周期加權平均法法nContinuous weighted average 連續加權平連續加權平均法均法nNet realizable value (NRV) 可變現凈值可變現凈值nCost of goods sold 銷貨成本銷貨成本Inventory definition by IAS 2nInven

3、tories are the assets which shown below in the ordinary course of business:Held for sale (finished goods)In the production process for sale (work in process)Materials or supplies to be consumed in the production process (raw materials)Purchase cost and pricing method (采購成本及計價方法）nIAS 2 regulate there

4、 are several cost should be included in the cost of inventory:Costs of purchase (incl. taxes, transport, and handling cost) less trade discounts received.Costs of convention (incl. fixed and variable manufacturing overheads).Other costs incurred in bringing the inventories to their present location

5、and condition. Methods of pricing inventories:存貨計價方法1.Specific identification method : assigned to each unit, which easily identified with a high unit cost, eg. Jewelers or antiques. 2.FIFO: used or sold in the order in which they are acquired. Inventory is stated with current costs in the statement

6、 of financial position. Limitation: previous cost against current revenue.Methods of pricing inventories:存貨計價方法3.LIFO: Disallowed. IAS 2(revised) does not permit the use of LIFO.4.AVCO (average weighted cost): average price of the components is changed as purchasing prices change.Two possible method

7、s of calculating AVCOnContinuous weighted average method : new unit cost of inventory is calculated whenever a new receipt of materials occurs. AVCO = Remaining inventory cost = Issues cost nPeriodic weighted average method: uses a simple average of the purchase prices paid during the period and it

8、calculates the average costs of units receipt during an accounting period.Transactions during May 20 x1 of LIXIN company are as follows: Date Opening balanceReceiptIssueUnit costUnitsUnitsUnits$Opening balance 1st May10065 May100810 May15015 May2501025 May250How would issues and closing inventory be

9、 valued using FIFO and AVCO method in turn?Solution: (a) FIFODate Opening balanceReceiptIssueUnit costCost of issueUnitsUnitsUnits$Opening balance 1 May10065 May100810 May150100units $6 + 50units $8 = $1,00015 May2501025 May25050units $8 + 200units $10 = $2,400Closing inventory 31 May50units $10 = $

10、500Solution (b) AVCOcontinuous weighted averageDate Opening balanceReceiptIssueUnit costCost of issueBalanceUnitsUnitsUnits$Units Value $Opening balance 1 May10061006005 May10081008007(w1)2001,40010 May1507150units $7 = $1,050(150)(1,050)75035015 May250102502,5009.5(w2)3002,85025 May2509.5250units $

11、9.5 = $2,375(250)(2,375)Closing inventory 31 May9.550475Solution (b) AVCOperiodic weighted averageDateOpening balanceReceiptIssueUnit costTotal costUnitsUnitsUnits$5 May100880015 May250102,5003503,300The average cost during the period ($3,300 / 350units) $9.43The value of closing inventory ($9.43 50

12、units) $471.5Measurement of inventory 存貨的計量nIAS2 states that inventories should be measured at the lower of COST and net realizable value (NRV). nNRV = Selling Price - (Completion Costs + Selling Costs)Example 1: LIXIN Company has 200 different items which had cost $40 each. These items were found t

13、o be defective at the balance sheet date. The cost of rectification after the balance sheet date is to be $1,500 , after which they could be sold for $50 each, with selling expenses totaling $800. Solution:$Cost (20040)8,000Estimated selling price (20050)10,000Less further costs and expenses (1,500

14、+ 800)(2,300)7,700 (NRV)Loss on write-down of inventory300The journal entry required to recognize the loss and reduce the inventory amount is:DEBIT Loss on write-down of inventory (Expense) 300CREDIT Inventory 300 Double entry bookkeeping 復式記賬法Debit side Credit sideIncrease in:Asset (statement of fi

15、nancial position)Expense (income statement)Increase in:Liability (statement of financial position)Equity (statement of financial postion)Income (income statement)Example 2：suppose a company has three items of inventory. their cost and NRVs are as follows. Calculate the amount of loss on write-down o

16、f inventory and the inventory value appears in the statement of financial position.Units $000$000$000Itemin each itemCostNRVLower of cost and NRVA55units 17 = 857979B55units 8 = 404540C88units 10 = 808580Total205209199DEBIT Loss on write-down of inventory (205,000 - 199,000) $6,000CREDIT Inventory $

17、6,000Therefore, Answer for Q1 is $6,000, and for Q2 is $199,000Cost of sales 銷售成本Formula for calculating cost of goods sold:$Opening inventory valuexAdd cost of purchasesxLess closing inventory(x)Cost of salesxExample: LIXIN company has purchased goods costing $78,000 and has made sales totaling $12

18、0,000 by the end of 20 x1. Goods costing $5,000 have not been sold by the end of the year. Assume the opening inventory is zero. Calculate the gross profit in the income statement and prepare the ledger account of income statement and inventory for the year.INCOME STATEMENT FOR THE YEAR ENDED 31 DEC 20X1