Reference no: EM132644007
Irrigation (Australia) ltd was established on 1 July 2016.The Company imports one model of self -propelled irrigation equipment for use on farms, race course, etc. Three shipments of irrigation equipment have been received during the year ended on 30 June 2017.
Shipment 1 10 units, invoice cost per irrigator A$25 000
Shipment 2 10 units, invoice cost per irrigator A$27 000
Shipment 3 10 units, invoice cost per irrigator A$30 000
The rapid increase in cost is attributed to the falling value of the Australian dollar. Freight and handling charges are $1000 per irrigator.
The company's record show that a total of 18 units have been sold - 10 from shipment 1, six from shipment 2 and two from shipment 3. A physical stock take on 30 June 2017 showed there were 12 irrigators on hand. The current recommended selling price is $40 000 per irrigator but, due to the current drought, the most recent sale was at a price of $30 000.One irrigator has been used for demonstration purposes at local agricultural shows and field days. It has an estimated current net realisable value of $19 000
Required
Question a) Determine the value of the closing inventory on 30 June 2017 in accordance with AASB 102 and any other relevant accounting standards. Justify all elements of your calculation.
Question b) What is the value of the closing inventory required to be disclosed under paragraph 36 of AASB 102?
Question c) On 31 December 2017 the irrigator used for demonstration purposes is still on hand. Good rains have significantly improved the irrigation outlook for farmers and the estimated net realisable value of this irrigator is now $24 000. What effect, if any, would this have on the valuation of this item of inventory on 31 December 2017? Show any relevant general journal entries and justify your answer.
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