Accounting Assignment

Question 1 Solution

i. Property, plant and equipment represent the cost of property, plant and equipment together with any directly traceable costs to purchase them. The cost also includes the transport necessary to bring them to their planned location and any additional costs to bring them up to their proper condition for their proposed use. Any self constructed asset costs include the materials and labour to construct, finance and any regulatory consent required. Property, plant and equipment is valued with depreciation on a straight line basis, less any residual value over there useful life. The Warehouse Group deal with the trade off between relevance and faithful representation by reviewing the carrying amounts of property plant and equipment for impairment; this represents a reliable measurement that takes into account any diminishing value.

ii. Trade receivables represent sales made to clients on credit or the collection of refunds from suppliers that haven’t been subtracted from client’s due accounts. Trade receivables are non interest bearing. The value of trade receivables is less any written off depts that are uncollectable and there is provision for impaired receivables. Due to the short term life of trade receivables The Warehouse Group deal with the trade off between relevance and faithful representation by using the carrying value method to approximate fair value; this indicates a faithful and reliable representation.

iii. Inventories represent stock and their cost is stated at the lower of cost and net realisable value. The value of inventories includes a proportion of supply chain variable expenditure and transfers of gains or losses from equity that are related to inventories. The weighted average cost has been assigned to individual items. The Warehouse Group deal with the trade off between relevance and faithful representation by the use of net realisable value based on the estimated selling price during the course of normal...