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INVENTORIES
Question Example
The newly appointed accountant of Quattro Ltd asked you to
help him with the calculation of the following transaction.
Quattro Ltd bought steel from Stockal Ltd and received the
invoice for R540 000 (10 000 units) (including Value-Added Tax
(VAT)). Quattro Ltd paid cash in order to make use of the 7%
cash discount offered by the supplier. The steel was
transported by rail for which Quattro Ltd paid R35 000
(excluding VAT). Costs to insure the steel while in transit
amounted to R1 000 (excluding VAT). On inspection of the
steel by the foreman, it was found that 1 000 units to the
value of R54 000 were damaged. Following negotiations with
Stockal Ltd, it was agreed that these steel units will be
returned to the supplier. It may be assumed that Quattro Ltd
is a registered VAT vendor and that the steel will be used to
generate taxable supplies.
Required: Calculate the cost per unit of the steel inventory in
line with IFRS requirements (7 marks)
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