FR - IFRS-13 IAS-2 IAS-21

Which of the following statements regarding IFRS 13 Fair Value Measurement is not true?

• Level 1 inputs are likely to be used without adjustment.

• Level 3 inputs are based on the best information available to market participants and

  are therefore regarded as providing the most reliable evidence of fair value.

• Level 2 inputs may include quoted prices for similar (but not identical) assets and

  liabilities in active markets.

• Level 1 inputs comprise quoted prices in active markets for identical assets and

  liabilities at the reporting date.

Bouani Co manufactures cycling equipment. It has a number of specialised frames in

inventory which cost $20,000 to manufacture. These frames were manufactured following

an order from a customer at an agreed selling price of $30,000. Due to recent technological

advances, the current cost of manufacturing such frames is estimated to be $15,000. Bouani

Co also has inventory of 3,000 pedals with a cost of $20 each. These have become damaged.

If Bouani Co spends $5,000 to repair all of them, these could be sold for $21 each.

Which TWO of the following statements regarding Bouani CO's inventory are true?

• The frames should be valued at $15,000

• The frames should be valued at $20,000

• The frames should be valued at $30,000

• The pedals should be valued at $60,000

• The pedals should be valued at $58,000

IAS 2 Inventories specifies expenses that should be included in year-end inventory values.

Which THREE of the expenses below are allowable by IAS 2 as expenses that should be

included in the cost of finished goods inventories?

• Marketing and selling overhead

• Variable production overhead

• General management overhead

• Factory management overhead allocated to production

• Cost of delivering raw materials to the factory

Neville has only two items of inventory on hand at its reporting date.

Item 1 — Materials costing $24,000 bought for processing and assembly for a customer under

a 'one off' order which is expected to produce a high profit margin. Since buying this material,

the cost price has fallen to $20,000.

Item 2 — A machine constructed for another customer for a contracted price of $36,000. This

has recently been completed at a cost of $33,600. It has now been discovered that in order

to meet certain health and safety regulations modifications at an extra cost of $8,400 will be

required. The customer has agreed to meet half of the extra cost.

What should be the total value of these two items of inventory in the statement of financial

position?

Mario has incurred the following costs in relation to a unit of inventory:

Raw materials cost 1.50

Import duties 0.40

Direct labour 0.50

Subcontracted labour costs 0.80

Recoverable sales tax 0.20

Storage costs 0.05

Production overheads (per unit) 0.25

There was a problem with the first batch of items produced, so abnormal wastage costs of

$0.10 per unit have also been incurred by Mario.

At what cost should Mario value this inventory in its financial statements?

• $3.50

• $3.45

• $3.80

• $3.70

On 30 September 20X4 Razor's closing inventory was counted and valued at its cost of

$1 million.

This included some items of inventory which had cost $210,000 and had been damaged in a

flood on 15 September 20X4. These are not expected to achieve their normal selling price

which is calculated to achieve a gross profit margin of 30%.

The sale of these goods will be handled by an agent who sells them at 80% of the normal

selling price and charges Razor a commission of 25%.

At what value will the closing inventory of Razor be reported in its statement of financial

position as at 30 September 20X4?

IAS 21 The Effects of Changes in Foreign Exchange Rates defines the term 'functional

currency'.

Which of the following is the correct definition of 'functional currency'?

• The currency in which the financial statements are presented

• The currency of the country where the reporting entity is located

• The currency that mainly influences sales prices and operating costs

• The currency of the primary economic environment in which an entity operates

Sunshine is an entity with a reporting date of 31 December 20X1 and a functional currency

of dollars ($). On 30 June 20X1, it purchased land from overseas at a cost of 30 million dinars.

The land is an item of property, plant and equipment and is measured using the cost model.

Exchange rates are as follows: Dinars: $1

As at 30 June 20X1 3.0

As at 31 December 20X1 2.0

Average rate for year-ended 31 December 20X1 2.5

The fair value of the land at 31 December 20X1 was 32 million dinars.

What is the carrying amount of the land as at 31 December 20X1?

• $10 million

• $15 million

• $12 million

• $16 million

In relation to IAS 21 The Effects of Changes in Foreign Exchange Rates, which of the

following statements are true?

(i) Exchange gains and losses arising on the retranslation of monetary items are

recognised in other comprehensive income in the period.

(ii) Non-monetary items measured at historical cost in a foreign currency are not

retranslated at the reporting date.

(iii) An intangible asset is a non-monetary item.

• All of the above

• (ii) and (iii) only

• (i) and (iii) only

• (i) and (ii) only

An entity took out a bank loan for 12 million dinars on 1 January 20X1. It repaid 3 million

dinars to the bank on 30 November 20X1. The entity has a reporting date of 31 December

20X1 and a functional currency of dollars ($).

Exchange rates are as follows: Dinars: $1

1 January 20X1 6.0

30 November 20X1 5.0

31 December 20X1 5.6

What is the total loss arising (to the nearest $000) on the above transactions in the year

ended 31 December 20X1?