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Hi
plz help!
What value should net receivables be presented in the Balance Sheet at the end of the year.
Purchases of raw materials 112,000
Returns inwards 8,000
Decrease in raw materials inventories 8,000
Direct wages 42,000
Cost of deliveries outwards 4,000
Cost of deliveries inwards 3,000
Production overheads 27,000
Increase in work-in-progress inventory 10,000The works cost value of goods completed is??
#How do you account for increases in W.I.P and Decreases in raw materials inventories?
So Far…
Purchases 112,000
Cost of deliveries inwards 3,000
Direct wages 42,000
Production overheads 27,000
Cost of goods completed =184000But the answer is 182,000
What am I missing? How do I account for Increase in W.I.P or Decreases in raw material inventories? Or are they ignored from the calculation? I know that we will not include return inwards (because we don’t have no sales), and cost of deliveries outwards(expense) but I am really confused about Increase in W.IP and Decreases in raw material inventories.. Please help Sir!
If inventories decrease then we are using inventory for the sales and therefore it increases the cost of goods sold.
If inventories increase then we are not using all the purchases to makes sales and so it reduces the cost of goods sold.
So your answer is correct as far as you have gone, but you need to add the reduction in material inventories and subtract the increase in WIP inventory.
(I don’t know where you found this question, but manufacturing accounts are not in the syllabus for F3. Also we stopped calling it the Balance Sheet many years ago – it is Statement of financial position)
i found the question in an old accounting book my dad gave me… i was just doing some examples from there. sorry for confusion.. i thought it was also not in f3.. but tried it anyway. thanks for your help!
much appreciated
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