Cost formulas: cost of issues and closing inventory: Dried apricots

Context

Pomarelle SA (a fictitious company) runs apple orchards, presses its own apples and apples bought from growers to make juice and compote, and distributes imported dried fruit (apricots, figs) to delicatessens. It reports at 31 December and applies IFRS. You are in charge of the inventory closing file at 31 December 20X6: classification of the items, cost of purchase and production cost, joint production, cost formulas, net realisable value test, write-downs and reversal, entries, impact, amount recognised as an expense, note, responses to the reviewer's notes and conclusion. Under the entity's policies (file data), the cost of dried fruit is assigned using first-in, first-out (FIFO) and that of juice and compote using the weighted average cost calculated over the year; a periodic inventory system is used, the cost of sales being determined at the reporting date; production costs are recorded by nature, materials consumed being released from inventories at their cost. The measurement of the harvest under IAS 41, the classification of the forward exchange contracts under IFRS 9, the accounting for the pressing line under IAS 16 and the treatment of events after the reporting period under IAS 10 are file data; tax is out of scope. The entries of the file are presented as not yet recorded (teaching assumption).

Assignment

Cost formulas and cost of sales workpaper (apricots, juice, compote, components).

Purpose of the workpaper

Determine the applicable cost formula (specific identification, FIFO or weighted average cost) and its consistency for inventories of a similar nature and use, calculate the cost of issues and of closing inventory, reconcile the cost of sales with the inventory movement and record the entries.

Questions of the file covered by this workpaper

• Which cost formulas apply and how do you respond to the proposals of the finance director?
• Calculate the cost of sales and the closing inventories of the apricots, the juice and the compote.
• Record the entries of the file.

• MemoPlanning memo of the fileOpen
• MemoMemo from the orchard managerOpen
• ContractForward exchange contractsOpen
• InvoiceInvoice for the dried apricot lotOpen
• DocumentCustoms declaration and forwarder invoiceOpen
• ScheduleCosts proposed for capitalisation by the purchasing departmentOpen
• Schedule20X6 pressing campaign tableOpen
• MemoMemo from the production directorOpen
• MemoSales department memo on the campaign outputOpen
• ExtractStock cards and 20X6 sales registerOpen
• MemoMemo from the finance director: closing proposalsOpen
• ScheduleSelling price and cost data at 31 December 20X6Open
• ContractDistrimax firm sales contractOpen
• InvoiceQuotation from the relabelling subcontractorOpen
• MemoPost-closing memo from the purchasing departmentOpen
• ScheduleCount of the dried figs and the packagingOpen
• MemoMemo from the maintenance departmentOpen
• ScheduleInventory and 20X6 purchases trial balanceOpen
• ContractBank credit facility agreementOpen
• ScheduleDraft note on inventoriesOpen
• DocumentValuation report on the orchard landOpen
• ContractFactory insurance policyOpen