Accounts and Finance Topics

Activity based costing  ABC   is a method for assigning costs to products, services projects, tasks, or acquisitions, based on Activities that go into them. Resources consumed by these activities. ABC contrasts with traditional costing , which sometimes assigns costs using somewhat arbitrary allocation percentages for overhead or the so-called indirect costs. Activity based costing (ABC) assigns manufacturing overhead costs to products in a more logical manner than the traditional approach of simply allocating costs on the basis of machine hours. Activity based costing first assigns costs to the activities that are the real cause of the overhead. It then assigns the cost of those activities only to the products that are actually demanding the activities. As a result, ABC and traditional cost accounting can estimate  cost of goods sold  and  gross margin  very differently for individual products. Contradictory and uncertain ...

Example # 1 Yummie, candy and chocolate distributor, made the following purchases of new product, Amazing Chocobar during 20X1: 10 January 20X1: 1 000 units at CU 28.00 each; 14 February 20X1: 1 500 units at CU 28.20 each; 17 March 20X1: 3 000 units at CU 28.40 each; and 18 June 20X1: 2 500 units at CU 28.55 each. As Chocobar is a new product and massive advertising campaign is planned after 1 July 20X1, Yummie sold only one batch of 4 200 units of Amazing Chocobar to its biggest customer, for total sales price of CU 159 600. This happened on 2 May 20X1. Required: Calculate the stock value of Amazing Chocobar in Yummie’s warehouse at 30 June 20X1 (ignore other components of acquisition cost). 1 - FIFO Method,                    2 - Weighted Average Method Example # 2 XYZ Company imports good from China and sells them in the local market. It is confused between using FIFO method and Weighted Average method to value its...

Overview IAS 2 sets out the accounting treatment for inventories, including the determination of cost, the subsequent recognition of an expense and any write-downs to net realisable value. SCOPE Applies to all inventories except: - work in progress on construction and service contracts (IAS 11); - financial instruments (IAS 32 and IFRS 9); and - biological assets arising from agricultural activity (IAS 41). Does not apply to the measurement of inventories held by: - producers of agricultural and forest products, and minerals and mineral products, that are measured at net realisable value in accordance with well-established practices in those industries; and - commodity broker-traders who measure their inventories at fair value less costs to sell. Changes in the above inventory values are recognised in profit or loss in the period of the change. Definitions   INVENTORIES – assets that are: - held for sale in the ordinary course of business; -...

Example # 1 A company owns a car that was involved in an accident at the year end. It is barelyuseable, so the value in use is estimated at $1,000. However, the car is a classic and thereis a demand for the parts. This results in a fair value less costs to sell of $3,000. The opening carrying value was $8,000 and the car was estimated to have a life of eight years from the start of the year. Required : Identify the recoverable amount of the car and any impairment required.                                                           Example # 2 An entity owns a property which was originally purchased for $300,000. The property has been revalued to $500,000 with the revaluation of $200,000 being...