Page 81 - Finac1 Test 1 slides

INVENTORIES

Question Example 1

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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