Exam 8: Accounting for Selected Assets

It is most likely that a manufacturing firm will have inventory that constitutes raw materials, work in progress and finished goods.

The cost of an item is important in considering whether it should be classified as inventory or not.

Inventory should normally be classified on the balance sheet as:

Under AASB 102, where the purchase price (cost) of an item of inventory is $248 and the net realisable value is $256, inventory should be adjusted to reflect the net realisable value.

Management prepares and examines an aged list of Accounts Receivable balances, which analyses each debt in order to reach a decision on the probability of receipt of payment.

Depreciation spreads the original cost of a non-current asset over its useful life, but it cannot be considered a precise measure as it is based on forecasts of future outcomes.