a calculation of the value of inventories to be included in the year end (31 r 20X1) financial statements, following IAS 2 - Inventories. port to the chief accountant explaining the reasons (under IAS 2) for valu ories on the bases you applied in (a).

Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter15: Financial Statement Analysis
Section: Chapter Questions
Problem 56P: The following selected information is taken from the financial statements of Arnn Company for its...
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Kenton Shoes Ltd is a small company that sells a range of Casual and Work shoes through the
internet. The accountant has asked you calculate the value of the company's closing inventory
on 31 December 20X1 for inclusion in the financial statements. The following additional information
is available:
1. Pairs of shoes counted in the warehouse at the year-end stocktake were as follows:- Casual
Shoes 10,000, Work Shoes 5,000 pairs
2. 2,000 pairs of Casual Shoes were received into stores on 3 January 20X2. The goods were
ordered on 23 December 20X1 and invoiced on 24 December but were still in transit from the US
supplier when the inventory count was being performed. The invoice for these goods is included in
the purchase ledger and the trade payable has been recognised on 31 December 20X1.
3. Due to an increase in the price of toughened leather, the supplier of Work Shoes increases the
cost of each pair from 1 November 20X1. Since this date, Kenton Shoes has received 3,000 pairs
in its stores.
4. Selling price and cost per pair of shoes in 20X2.
Casual Shoes Work Shoes
£
£
Purchase cost:
6
12
01/01/20X2 - 01/11/20X2
01/11/20X2 - Present
6
17
5. It is company policy to use the FIFO method of recording the flow of inventory costs.
Required:-
a)
Prepare a calculation of the value of inventories to be included in the year end (31
December 20X1) financial statements, following IAS 2- Inventories.
b)
Write a report to the chief accountant explaining the reasons (under IAS 2) for valuing
the inventories on the bases you applied in (a).
Transcribed Image Text:Kenton Shoes Ltd is a small company that sells a range of Casual and Work shoes through the internet. The accountant has asked you calculate the value of the company's closing inventory on 31 December 20X1 for inclusion in the financial statements. The following additional information is available: 1. Pairs of shoes counted in the warehouse at the year-end stocktake were as follows:- Casual Shoes 10,000, Work Shoes 5,000 pairs 2. 2,000 pairs of Casual Shoes were received into stores on 3 January 20X2. The goods were ordered on 23 December 20X1 and invoiced on 24 December but were still in transit from the US supplier when the inventory count was being performed. The invoice for these goods is included in the purchase ledger and the trade payable has been recognised on 31 December 20X1. 3. Due to an increase in the price of toughened leather, the supplier of Work Shoes increases the cost of each pair from 1 November 20X1. Since this date, Kenton Shoes has received 3,000 pairs in its stores. 4. Selling price and cost per pair of shoes in 20X2. Casual Shoes Work Shoes £ £ Purchase cost: 6 12 01/01/20X2 - 01/11/20X2 01/11/20X2 - Present 6 17 5. It is company policy to use the FIFO method of recording the flow of inventory costs. Required:- a) Prepare a calculation of the value of inventories to be included in the year end (31 December 20X1) financial statements, following IAS 2- Inventories. b) Write a report to the chief accountant explaining the reasons (under IAS 2) for valuing the inventories on the bases you applied in (a).
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