Home For AAT student members AQ 2013 AAT Level 3 (Level 6 in Scotland)
Current updates regarding coronavirus (Covid-19) and the precautions AAT are taking will be continually updated on the below page.

Please check this link for the latest updates:
We hope you are all safe and well and if you need us we will be here. 💚


FRA - Tutorial - 9.5?

WoooofWoooof Well-KnownRegistered Posts: 174
Can someone explain how they come up with the answer D?

I can't figure out how they got this answer! :confused1:

Comments

  • columbiacolumbia Experienced Mentor Registered Posts: 580
    Hi

    Welcome to the forum.

    You are going to have to be a bit more specific please.

    What book are you working from, can you post the whole question on here at all?

    There are always people willing to help, but without knowing the full facts I'm afraid you won't get a reply!

    Tracy
  • WoooofWoooof Well-Known Registered Posts: 174
    Sorry :blushing:
    9.5: A stationery supplies business has 500 large ring binders in stock at the end of it financial year on 30 June 2005. The details are
    • cost price £2.20 per ring binder
    • selling price £4.00 each
    As the ring binders have not sold well, the owner of the business has decided to overprint them with pictures in order to make them attractive to students starting courses at the local college in September. The cost of the over printingwill be £1 per binder and the "special offer" price to students will then be £3 per binder.

    What is the stock valuation for 500 binders in stock on 30 June 2005?

    (a) £2,000
    (b) £1,500
    (c) £1,100
    (d) £1,000

    Osborne Books - Unit 5 - Financial Records and Accounts - Tutorial
  • welshwizardwelshwizard Trusted Regular South WalesRegistered Posts: 465
    Hi

    This situation is subject to IAS 2 which state that 'Inventories shall be valued at the lower of cost or net realisable value'.

    The goods have cost £2.20
    Overprinting cost £1.00
    They will be sold at £3.00


    Therefore, the goods will be valued at selling price (£3.00) - conversion cost (£1.00) = £2.00 [ typos do cause problems hope that's better]

    At 30 June 2005, inventory would be valued thus:

    £2.0 x 500 units = £1,000.00

    Hope it helps.

    CHeck out Steve Collings clearly explained document at: http://www.accountancystudents.co.uk/images/uploads/Extract%20of%20A%20Summary%20of%20IFRS%20and%20IAS%20publication.pdf
  • jewels.pjewels.p Font Of All Knowledge Registered Posts: 1,774
    Hi Welshwizard,

    I am getting a bit confused. Where you have written "Therefore the goods will be sold at selling price - conversion cost" do you mean the goods will be stock valued at selling price - conversion cost?
  • rachy1975rachy1975 Trusted Regular Registered Posts: 366
    Hi

    This situation is subject to IAS 2 which state that 'Inventories shall be valued at the lower of cost or net realisable value'.

    The goods have cost £2.20
    Overprinting cost £1.00
    They will be sold at £3.00


    Therefore, the goods will be sold at selling price - conversion cost

    At 30 June 2005, inventory would be valued thus:

    £2.0 x 500 units = £1,000.00

    Hope it helps.

    CHeck out Steve Collings clearly explained document at: http://www.accountancystudents.co.uk/images/uploads/Extract%20of%20A%20Summary%20of%20IFRS%20and%20IAS%20publication.pdf

    i was also gettin confused with this...is it the selling price minus the £1 overprinting as this is what is costs to make them £3??
  • welshwizardwelshwizard Trusted Regular South WalesRegistered Posts: 465
    now edited
Sign In or Register to comment.