Reference no: EM133115937

Question - Zenith Trading Establishment imports Mobility Aids for distribution to the local retail sector. During the year, January to December 2020, the company incurred following expenses: List price of purchase of mobility aids $250,000 Trade discounts on purchase 5% Handling costs relating to imports $5,000 Salaries of accounting department $72,000 Sales commission paid to sales agents $36,000 After sales warranty costs $5,000 Import duties $10,800 Freight expense $12,000 Insurance of purchases $7,500 Brokerage commission paid to indenting agents $5,000. Zenith Trading Establishment bought these items on 1 April 2020 on credit terms which the company eligible for a 2 ½ % cash discount when the invoice was settled on 27 April 2020.

Required -

A. Calculate the total cost for purchases of the mobility aids.

B. Explain the rationale for the treatment of each item of cost incurred.

C. Closing inventory at year-ended 31 December 2020 amounted to $164,300 valued at cost. Prior to year-end some inventory items were damaged, and these will require repairs that will cost an estimated $1,280. After being repaired, these items can be sold for 90% of cost. The cost of these damaged items was $2,400. Calculate the value of closing inventories as at 31 December 2020.

D. Outline the three major categories of inventories dealt with under IAS2.

E. Explain the valuation of inventories that is to be presented in the financial statements based on principle and concepts outlined in IAS2.