Page 19 - Finac1 Test 1 slides - 4. Inventories

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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