IFRS PRACTICAL IMPLEMENTATION GUIDE AND WORKBOOK

Wiley IFRS: Practical Implementation Guide and Workbook

30

Case Study 2

First-in, First-out (FIFO) Method Facts

XYZ Inc. is a new ly established international trading company. It commenced its operation in 2005. XYZ imports goods from Chi na and sells in the local market. It uses the FIFO method to value its in– ventory. Listed next are the purc hases and sale s made by the entity during the year 2005 : Purchases January 2005 March 2005 September 2005 Sales May 2005 November 2005 100,000 units @ $ 25 each 15,000 units @ $ 30 each 20,000 units @ $ 35 each 15,000 units 20,000 units Required Based on the FIFO cos t flow assumption, compute the value of inventory at May 31, 2005, Septe m– ber 30,2005, and December 31, 2005 . Solution (a) January 2005 March 2005 + 10,000 units @ $25 + 15,000 units @ $30 Purchase Purchase

$250,000 $450 000 $700,000 $(250,000) $(I5 0 000l $(400 000l

Total

May 2005

Sales (15,000 units)

- 10,000 units @ $25 - 5,000 units @ $30

(b)

(c) Inventory valued on FIFO basis at May 31, 2005:

10,000 units @ $30

$300 000 $700 000

(d) September 2005 + 20,000 units @ $35 (e) Inventory valued on FIFO basis at September 30, 2005: Purchase

10,000 units @ $30 20,000 units @ $35

$300,000 $700 000

$ 1 000000 $(300,000) $<350 0001 $(650 0001

November 2005

Sales (20,000 units) - 10,000 units @ $30 - 10,000 units @ $35

(f)

(g) Inventor y valued on FIFO basis at December 31, 2005: 10,000 units @ $35

$350 000

Case Study 3

Weighted-Avera ge Cost Method Facts

@ $250 per unit @ $300 per unit @ $350 per unit Vigilant LLC, a newl y incorporated company, uses the latest vers ion of a software package (EXODUS) to cost and value its inventory. The software uses the weighted-average cos t method to value inve ntory. The followi ng are the purchases and sales made by Vigilant LLC du ring 2006 (as a newly set up company, Vigilant LLC has no begi nning inventory) : Purchases January March September Sales March 150 units December 170 units 100 units 150 units 200 units