SMART PHONES

Part A

Accounting policy

Inventory is valued at the lower of cost and net realisable value. Movements of inventory is recorded
using the First-in-first-out method. 1.5

Inventory

Inventory 419,900 0.5

Stationary 520 0.5
420,420
Calculations

Purchase A-phone S-phone

Purchase price 250,000 0.5 152,000 0.5
Non-claimable import duties (15 000 * 1/3) 5,000 0.5 -
Claimable import duties - - 0.5 Less 0.5 if included, 0.5
Storage costs - - 0.5 if left out in total
Courier costs 600 0.5 400 0.5
Total costs 255,600 152,400
Total phones AS NET Sê 50 X 5112 50 40
Price per phone GEE PUNT 5,112 0.5P 3,810 0.5P

Closing inventory 60 30
Amount 50 0.5 30 0.5
Value 5,112 0.5P 3,810 0.5P
Amount 10 0.5 0
Value 5,000 0.5 4,000
305,600 114,300 419,900

Available 8.0
Max 10

Part B

To: Mr Anroid
From: Student
Date: Today
Subject: Financial statements for the year ended 31 December 2016 1

Dear Mr Anroid

In terms of IAS 2 inventory has to be measured at the lower of cost and net realisable value. 0.5
Cost will be all the costs of purchase. 0.5

Net realisable value if the estimated selling price in the ordinary course of business less the
estimated costs of completion and the estimated costs necessary to make the sale. 0.5
Smart Phones will have to measure its inventory at the lower of these two.
The cost of the S-phones in inventory on 31 December 2015 is R3 810. 0.5
The net realisable value of these items if R3 500 due to a drop in demand. 0.5

Therefore the S-phones will have to be measure at the NRW as this is the lowest. 0.5

An inventory write down of R9 300 will therefore be necessary in order to measure the S-phone at
NRW. 0.5

(R 3 810 - R3 500 x 30 = R9 300) 1P

Total 3.5
Max 3
 P

Less 0.5 if included, 0.5

if left out in total

C
P

Only award if
incorporated in
explanation