Inventory in transit

Home Forums Ask ACCA Tutor Forums Ask the Tutor ACCA F7 Exams Inventory in transit

This topic contains 1 reply, has 2 voices, and was last updated by Avatar of MikeLittle MikeLittle 1 year, 9 months ago. This post has been viewed 125 times

Viewing 2 posts - 1 through 2 (of 2 total)
  • Author

  • avatar
    • Topics: 3
    • Replies: 6

    As per Jurate & Dovile of e.g 1 concerning goods in transit :
    ” Goods despatched by Jurate to Dovile before the yr end ( 31/12/2009) with the related invoices to the value of $10000 were not received by Dovile until 4 Jan 2010. Original cost of goods was $10,000.”

    Adjustments made :
    + $10,000 in S inventory
    + $10,000 in Trade payables for P

    As per Boo e.g in BPP xam kit :
    “On 31 December 2008, Boo (parent) despatched goods which cost $80,000 to Goose (sub), at an invoiced cost of $100,000 n Goose received the goods on 2 Jan 2009 n recorded transaction then.”

    Adjustments made to B/S:

    + $80,000 in Goose inventory
    - $100,000 from receivables
    - $20,000 pup from CREarnings

    Why r the entries different from Jurate&Dovile (xcept pup part)?

    Avatar of MikeLittle
    • Topics: 0
    • Replies: 6968

    The BPP answer has applied a short cut here I think.

    To accelerate the goods into the records of Goose, the entry would be Dr Inventory on the Goose Balance Sheet $100,000 and Cr Accounts Payable ( Boo ) $100,000

    That now allows us to cancel the Accounts Receivable against the Accounts Payable.

    In addition, we now need to eliminate the pup so Increase Cost of Sales in Boo, Decrease Inventory by $20,000

    I think that, if you put through those adjustments in your workings, you’ll arrive at the same answer as BPP’s

Viewing 2 posts - 1 through 2 (of 2 total)

You must be logged in to reply to this topic.