Shaw Ltd imported raw materials from China worth R100,000.
They paid R8,000 as import duties and R2,000 as import taxes (the import taxes were subsequently refunded by the local government).
They paid R15,000 for transportation of the materials from China and another R2,000 as port handling charges for loading the materials at China.
Marketing expenses were R1,000 and the general administrative overheads amounted to R2,000.
What will be the value of inventories as per IAS 2?:
a.
R127 000
b.
R125 000
c.
R128 000
d.
R130 000
To calculate the value of inventories as per IAS 2, we need to include all the costs incurred to bring the materials to their present location and conditions.
Value of inventories = Cost of raw materials + Import duties + Import taxes (which were subsequently refunded) + Transportation costs + Port handling charges
Value of inventories = R100,000 + R8,000 + R2,000 - R2,000 + R15,000 + R2,000
Value of inventories = R125,000
Therefore, the value of inventories as per IAS 2 would be R125,000 (option b).