Page 6 - 7. COMPILER QB - INDAS 2

● labour = Rs. 65,000; and
● depreciation of plant used to manufacture the customized corporate gifts = Rs. 15,000.
The customized corporate gifts were ready for sale on 1 March 20X1. No abnormal wastage occurred in the

development and manufacture of the corporate gifts. Compute the cost of the inventory? Substantiate your
answer with appropriate reasons and calculations, wherever required.
SOLUTION

Statement showing computation of inventory cost
Particulars Amount Remarks

(Rs.)
Cost of purchases 5,00,000 Purchase price of raw material [purchase price
(Rs.5,50,000) less refundable purchase taxes

(Rs.50,000)]
Loan – raising fee - Included in the measurement of the liability.
Costs of purchase 55,000 Purchase price of consumable stores

Cost of conversion 65,000 Direct costs – labour
Production overheads 15,000 Fixed costs – depreciation
Production overheads 10,000 Product design costs and labour cost for

specific customer
Other costs 37,00 Refer working note
Borrowing costs - Recognised as an expense in profit or loss

Total costs of inventories 6,82,000

Working Note:
Costs of testing product designed for specific customer:

Rs. 21,000 material (i.e. net of the Rs. 3,000 recovered from the sale of the scrapped output) + Rs. 11,000
labour + Rs. 5,000 depreciation.

Q5 (Nov. 21)

Whether the following costs should be considered while determining the Net Realisable Value (NRV) of the
inventories?
(a) Costs of completion of work-in-progress;

(b) Trade discounts expected to be allowed on sale; and
(c) Cash discounts expected to be allowed for prompt payment
SOLUTION

Ind AS 2 defines Net Realisable Value as the “estimated selling price in the ordinary course of business less

the estimated costs of completion and the estimated costs necessary to make the sale.”
Costs of completion of work-in-progress are incurred to convert the work-in-progress into finished goods. Since
these costs are in the nature of completion costs, in accordance with the above definition, the same should
be deducted from the estimated selling price to determine the NRV of work-in-progress.
Trade Discount is “A reduction granted by a supplier from the list price of goods or services on business
7. 5