|No of Units||100|
|Total Cost ($)||10,000|
|Cost per unit||100|
|Selling Price (a)||110|
|Cost to Sell (b)||25|
|Net Realisable Value = (a-b)||85|
As per IAS 2, Inventory should be recorded at Cost or Net Realisable Value, whichever is lower.
|Value of Inventory = $85x100=||8,500|
1. There can be several reasons for Negative Cash flow from Operating activities like
a. Delayed remittances received from debtors
b. Bulky payments made to Creditors
c.Losses incurred during the current year
The negative Cash flows from operating activities should not be a matter of concern in short term but in long term, management should generate positive cash flows from operating activities for the business to run smoothly.
2. Significant amounts spent on R&D, Brand Development and advertising should not be recognised as an intangible asset, even though the expenditure incurred may provide future economic benefits; it should charge all such costs to the income statement.
Expenditure on advertising and promotional activities should be expensed when incurred as per IAS 38.
3. Market Value of firm = Market Price of share x No of shares
Book Value of firm = Book value of share x No of shares
From the above equation, it can be clearly said that Market Value of firm shall be higher than book value of share when market price of share is greater than book value of share, i.e. the fair market value of assets are greater than the book value of the assets
4. The characteristic of an assets are
a.) Should be controlled by the entity
b.) Should result from prior events or transactions
c.) Should result in future economic benefits flowing into the entity.