(Solved): Financial Reporting Analysis   Question 3    Water Works Limited is a construction c ...

Financial Reporting Analysis

Question 3 

1. Water Works Limited is a construction company. During their most recent stocktaking exercise, the following inventory items were identified:

1. i. Describe what is inventory as under IAS 2? 

1. ii. What is the amount at which inventory should be stated in the statement of financial position? 

1. Water Works Ltd. purchases items from various overseas suppliers. During their most recent trading year-end, the following costs were incurred. 

Cost of purchases (based on vendors' invoices)    600,000 

Trade discounts on purchases                                90,000 

Import duties                                                      13,500 

Freight and insurance on purchases                     26,500 

Other handling costs relating to imports             12,150 

Salaries of accounting department                      95,000 

Brokerage commission payable to agents for arranging imports 15,000 

Sales commission payable to sales agents       14,100 

Cost of security for warehouse                        43,000 

i. In keeping with IAS 2, determine the items that can be classified as inventory and calculate total cost of inventory.

ii. For any items that are not inventory, how should these be recorded in the financial 

statements?