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Ques-1
The inventory value for the financial statements of Global Inc for the year ended 30 june 2003 was based on a inventory count on 7 July 20X3, which gave a total inventory value of $950000.
Between 30 June and 7 July 206 following took place
Purchase of goods 11750
Sale of goods (mark up con cost at 15%) 14950
Goods returned by GLobal Inc to supplier 1500
What is the closing inventory value at 30june 2003?Ques-2
The closing inventory at a cost of a company at 31 jan 2003 amounted to $284000
The following items were included at cost in the total.
1. 400 coat, which had cost $80 each and normally sold for $150 each. Owing to a defect in manufacture, they were all sold after the reporting date at 50% of their normal selling price. Selling expenses amounted to 5% of the proceeds.
2. 800 Skirts, which had cost $20. These too were found to be defective. Remedial work in february 2003 cost $5 per skirt, and selling expenses for the batch totalled $800. They were sold for $28 each!
What is the inventory value after considering above according to IAS2??Ques-3
A company with an accounting date of 31 October carried out a physical check of inventory on 4 November 2003, leading to an inventory value at cost at this date of $ 483700.
Between 1 Nov 2003 and 4 Nv 2003 the following transactions took place :
1.Goods costing $ 38400 were received from suppliers.
2. Goods that had cost $14800 were sold for $20000
3. A customer returned, in good condition, some goods which had been sold to him in october for $600 and which had cost $400.
4. The company returned goods that had cost $1800 in october to the supplier, and received a credit note for them.
What figure should appear for inventory amount at 31 oct 2003Ques-1
From the information given we can assume a 7 days period and prepare a p&l account. Inventory on 7 July can be assumed as closing inventory and hence inventory on 30 June (which we have to find out) can be assumed as opening inventory.
While preparing the p&l account, we can calculate the cost of sales using the sales of 14,950 and mark-up of 15%. Then we can use that cost of sales and the rest of items given to calculate the inventory on 31 October 2003 like this below:
Ques-2
According to IAS 2, inventory must be valued at lower of cost and net realisabe value.
So in the two points given, we have to see if the NRV is lower than the cost at which they are valued at.
1:
400 x 80 = 32000 is cost
Due to the defect in the products they were sold at 50% less than the normal selling price. So now the selling price will be 150 x 0.5 = 75 / coat
Selling expenses amounted to 5 % of proceeds, hence: 75 x 0.05 = 3.75 / coat
So NRV (which is selling price – selling expenses) for the 400 coats will be:
400 (75 – 3.75) = 28,500
NRV is lower than the cost, so they should be adjusted.2:
NRV ( [28-5-1] x 800 = 17,600 is higher than the cost of 20 x 800 = 16,000. So this one doesn’t need adjustment.So the answer would be:
284700 – 32000 + 28500 = 281200Ques-3
This one is similar to to the first one, but we can just calculate by looking at the inventory movement. Cost of the sales and sales returns are given, so we don’t need to calculate cost of sales.
Answer will like this:
Hope that helps.. and see you in class tomorrow 🙂
The closing inventory of X amounted to $116400 excluding the following two inventory lines:
1. 400 items which had cost $4 each. All were sold after the reporting period for $3 each, with selling expenses of $200 for the batch.2. 200 different items which had cost $30 each. These items were found to be defective at the end of the reporting period. Rectification work after the statement of financial position amounted to $1200, after which they were sold for $35 each, with selling expenses totalling $300.
What’s the inventory amount?
1: 400 x 4 = 1600 cost is higher than the NRV of (400 x 3) – 200 = 1000
2:2200 x 30 = 6000 cost is higher than the NRV of 200 x 35 – 1200 – 300 = 5500So in both cases we have to use NRV.
Note that the amount of 116400 is not including these two items. So this time we will not need to deduct the cost and then add NRV. (In earlier question it was given including the cost.) So we will just add NRV as NRV is lower in both cases.
So answer will be:
116400 + 1000 + 5500 = 122900Inventories should be shown at lower of cost or net realisable value. Since inventories were known to be defective and require rectification work at end of period then the relevant calculation for inventories was net realisable value as this was lower than cost of inventories. Hope this helps.
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