Inventory Practice Question 2024

Inyathi Ltd.’s inventories consist of the following:

Opening Closing inventories Net realisable value

inventories

Rand Rand Rand

Raw materials 35 000 15 000 14 500

Work in progress 15 000 25 500 20 000

Finished 40 000 20 500 30 000

Packing materials 1 750 1 600 1 450

The following information for the year ended 31 December 2022 is available:

Rand

Revenue 275 000

Administrative expenses 25 000

Raw material purchases 90 000

Transport costs- raw materials 250

Variable production overheads costs 50 250

Fixed production overheads costs 41 250

Selling expenses 2 750

Inyathi Ltd.’s measures raw materials and work in progress according to the FIFO method.

Finished goods and consumables are measured using the weighted average method. Fixed
production overhead costs are allocated at 4 cents per unit based and the normal capacity of
1 000 000 units were produced.

Required:

1. Calculate the cost per classification of inventory at 30 June 20X12 so as to comply

with the requirements of IFRS.
2. Prepare the disclosure related to all matters in the financial statements of Univen Ltd
for the reporting date 30 June 20X12 in compliance with IFRS.
Suggested Solution

1. Cost per classification of inventory

Raw materials on 31 December 2022

Opening inventories R35 000
Raw materials purchased R95 000
Transportation costs-raw materials R250
Transfers to work in progress (R110 250)
Closing inventory R15 000

Work in progress on 31 December 2022

Opening inventories 15 000
Raw materials used R110 250
Variable production overheads R50 250
Fixed production overheads (1) R40 000
Transfers to finished goods (R190 000)
Closing inventories (R25 500)

Finished goods on 31 December 2022

Opening inventories R40 000
Transfers from work in progress R190 000
Goods already sold (R209 500)
Closing inventory R20 500

Cost of sales
Transfers from finished goods R209 500
Fixed production overheads - under -recovery (41 250 -40 000) R1 250
Consumable written down to net realizable value (1 600 – 1 450) R150
Total cost of sales R210 900

INYATHI LIMITED
Statement of Financial Position as at 31 December 2022
Assets Note
Current assets
Inventories 3 62 450

INYATHI LIMITED
Statement of Profit or Loss and Other Comprehensive Income for the Year
ended
31 December 2022
Revenue R275 000

Cost of sales (R210 900)

Gross profit R64 100
 Less: Expenses (27 750)

Administrative expenses (R25 000)

Selling expenses (R2 750)

Profit for the year R36 350

NYATHI LIMITED

Notes for the year ended 31 December 2022

1. Accounting policy
1.1. Inventories
Inventories are measured at the lower of cost and net realizable value using the
following measurement methods:
Raw materials and work in progress: first-in, first-out.
Finished goods and consumables: weighted average method.

2. Profit before tax includes the following item:

Administrative expenses 25 000
Selling expenses 2 750
Remeasurement of consumables to net realizable value (1 600 -1 450) 150

3. Inventories
Raw materials 15 000
Work in progress 25 500
Finished goods 20 500
Consumables 1 450
62 450