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  • Lopez, Nicole Joy CLASSWORK - INVENTORIES CFAS

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    The document defines inventories as assets held for sale in the ordinary course of business or as materials used in manufacturing. It lists the components of inventory cost as capital cost, storage space cost, inventory service cost, and inventory risk cost. It explains that abnormal expenses, administrative overhead, and selling costs are excluded from inventory cost. For service providers, inventory cost includes labor and other costs directly linked to providing the service. Inventory cost is determined using formulas that consider beginning inventory, ending inventory, and purchasing expenses over a period. Specific identification tracks costs of individual inventory items rather than grouping items. Net realizable value accounts for an asset's sale value less selling costs. Inventory write-downs record declines in market value below book value on the

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    The document defines inventories as assets held for sale in the ordinary course of business or as materials used in manufacturing. It lists the components of inventory cost as capital cost, storage space cost, inventory service cost, and inventory risk cost. It explains that abnormal expenses, administrative overhead, and selling costs are excluded from inventory cost. For service providers, inventory cost includes labor and other costs directly linked to providing the service. Inventory cost is determined using formulas that consider beginning inventory, ending inventory, and purchasing expenses over a period. Specific identification tracks costs of individual inventory items rather than grouping items. Net realizable value accounts for an asset's sale value less selling costs. Inventory write-downs record declines in market value below book value on the

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    6 views1 page

    Lopez, Nicole Joy CLASSWORK - INVENTORIES CFAS

    Uploaded by

    Nicole Joy Lopez
    The document defines inventories as assets held for sale in the ordinary course of business or as materials used in manufacturing. It lists the components of inventory cost as capital cost, storage space cost, inventory service cost, and inventory risk cost. It explains that abnormal expenses, administrative overhead, and selling costs are excluded from inventory cost. For service providers, inventory cost includes labor and other costs directly linked to providing the service. Inventory cost is determined using formulas that consider beginning inventory, ending inventory, and purchasing expenses over a period. Specific identification tracks costs of individual inventory items rather than grouping items. Net realizable value accounts for an asset's sale value less selling costs. Inventory write-downs record declines in market value below book value on the

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    © All Rights Reserved
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    Lopez, Nicole Joy DG.

    BSA 1

    CLASSWORK – INVENTORIES

    1. Define inventories

    - Assets held for sale in the ordinary course of business, during the manufacturing process for
    sale or as materials or supplies to be used in the manufacture.

    2. What are the components of the cost of inventories?

    - Capital cost

    - Storage space cost

    - Inventory service cost

    - Inventory risk cost

    3. Explain certain costs that are excluded from the cost of inventories.

    - Abnormal expenses incurred as a result of material waste, labor or other production


    conversion inputs, storage costs unless necessary as part of the manufacturing process, and all
    administrative overhead and selling costs are all excluded from inventory under both IFRS and US GAAP.

    4. Explain the cost of inventories of a service provider.

    - The labor and other expenditures directly linked to providing the service, as well as indirect
    costs attributable to them, make up a service provider's cost of inventories.

    5. Explain the cost formulas in determining the cost of inventories.

    - Beginning inventory value, ending inventory value, and purchasing expenses over a specified
    period of time make up the inventory cost formula.

    6. Explain the specific identification of determining cost of inventories.

    - The specific identification approach has to do with inventory valuation, specifically keeping
    track of each individual item in inventory and allocating costs individually rather than in groups.

    7. Explain net realizable value.

    - Accounts for an assets value in terms of the amount it would receive if it were sold, less selling
    costs. Accountants utilize NRV to guarantee that an asset's worth isn't inflated.

    8. Explain the accounting for inventory write-down.

    - An inventory write down is an accounting procedure that records the decline in the value of an
    item when its market value falls below its book value on the balance sheet.

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