inventory

StatementofFinancialPosition

Inventory188billion

StatementofComprehensiveIncome

Costofsale1400billion

Inventoryaccountingissue:

ition:Initialrecognitionandmeasurement

Costofinventory:historicalcostprinciple

ory

tspayable/cash

sale

ory

SOCIunderperiodicsystem

Costofsale:

Openinginventory

Add:Purcha

Add:carriageinwards

Less:Purchareturnsandallowance

Netpurcha

Less:Closinginventory

Costofsale

Closingentry/adjustingentry:

returnsandallowance

Inventory(closing)

Costofsale

ory(opening)

Purcha

Carriageinwards

esheetdate:

Historicalcostofendinginventory:unitcostxunits

Costofsale

Impairmenttest:Lowerofcostormarketprinciple(LCM)

Determinethereportingamountofinventory.

WhenNRVislowerthancost,

StatementofFinancialPosition

Inventory10002000

Less:Allowancefordeclineinmarketprice200300

InventoryNetrealizablevalue8001700

Adjustingentry

mentlossforinventory200100

ncefor…200100

Costofastmarketpriceof

ast

Accounts

receivalbe

amountoffuture

cashflow

Inventorynetrealizablevalue

PPE/intangible

asts

Recoverable

amount

Higherof1or2

lizable

value

nu:

prentvaluof

futurecashflow

StatementofFinancialPosition

1styearend2ndyearend

Inventory10001500

Less:Allowance(100)/(300)(400)

Net900/7001100

StatementofComprehensiveincome

Impairmentloss-100/-300-300/-100

Impactonnetprofit-200+200

Earningsmanagement:manipulation

Incomesmoothing

Bigbath

Investmentproperty

PPEinitialcost

Theinitialestimateofthecostsofdismantlingandremovingthe

itemandrestoringthesite10million/prentvalue

rplant10

ionfordismantlingNP10

Assumption:ntrate10%

StatementofFinancialposition

0th1st30th31th

Asts

Nuclearplantx+10(x+10)x29/3000

Liabilities

ProvisionfordismantlingNP1010x1.110x1.1300

Accountingentrieson1styearend.

stexpencarryingamountofProvisionx10%

ionfordismantlingNP

Accountingentryin31thyear.

ionfordismantlingNP

Asts=Liabilities+equity

-+-

-+

Assumption:donotdepreciation

StatementofFinancialPosition

0th1st10th0th1st10th

AstEquity

PPE10001100-1001000

Cash100-100

Total

Depreciationmethod

Doubledecliningbalancemethod

Cost13,alvalue1000,depreciationrate

40%

1styearend2ndyearend4th5th

Depreciation

expen

13000x40%

=5200

7800x40%

=3120

Straightline

PPE,net13000-5200=78007800-3120

=4680

Changeofestimateofufullife:in2ndyear,estimatethatresidual

ufullifeis2years

1st2nd3rd

Depreciationex.2400(12000-2400)/3(12000-2400)/3

Changeofmethodtodoubledecliningbalancemethod

Depreciationex.2400(13000-2400)x1/2

(12000-2400)/3