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Question # 4. A) You are required to: (a) Explain the term "inventories" as defined by international standard IAS2. (b) List the costs which should be included when measuring the cost of inventories and identify any costs which should be excluded. (c) Explain the term "net realisable value" in relation to inventories. (d) Explain the term "LCM (lower-of-cost-or-market)" in relation to inventories. B) M/s Multan Associates Imports resells five major brands of golf clubs, which are noted in the following table. At the end of its reporting year, M/s Multan Associates calculates its inventory at the lower of its cost or net realizable (LCM) value. The detail of inventory is given in following table: Quantity Product Line on Hand FS-240 GE-395 HF-150 IL-340 TX-300 1,000 750 200 1,200 800 Unit Cost (4+6) Rs.190 140 135 280 200 Market per Unit Rs.230 170 120 160 215 Required: 1) Construct table which reflect the yearend inventory values to be shown in balance- sheet based on LCM principle. 2) Also calculate the value of total loss of the M/s Multan Associates. 3) Record journal entry of the loss calculated in part 2. Question # 4. A) You are required to: (a) Explain the term "inventories" as defined by international standard IAS2. (b) List the costs which should be included when measuring the cost of inventories and identify any costs which should be excluded. (c) Explain the term "net realisable value" in relation to inventories. (d) Explain the term "LCM (lower-of-cost-or-market)" in relation to inventories. B) M/s Multan Associates Imports resells five major brands of golf clubs, which are noted in the following table. At the end of its reporting year, M/s Multan Associates calculates its inventory at the lower of its cost or net realizable (LCM) value. The detail of inventory is given in following table: Quantity Product Line on Hand FS-240 GE-395 HF-150 IL-340 TX-300 1,000 750 200 1,200 800 Unit Cost (4+6) Rs.190 140 135 280 200 Market per Unit Rs.230 170 120 160 215 Required: 1) Construct table which reflect the yearend inventory values to be shown in balance- sheet based on LCM principle. 2) Also calculate the value of total loss of the M/s Multan Associates. 3) Record journal entry of the loss calculated in part 2.

Answer rating: 100% (QA)

Answer 1 Inventories as defined by the International Accounting Standard 2 IAS 2 are assets that are held for sale in the ordinary course of business ... View the full answer