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HI Mike!
I have an issue with question in BPP. Need your help!
In preparing financial statements for the year ended 31 March 20X6, the inventory count was carried out on 4 April 20X6. The value of inventory counted was $36 million. Between 31 March and 4 April goods with a cost of $2.7 million were received into inventory and sales of $7.8 million were made at a mark-up on cost of 30%.
At what amount should inventory be stated in the statement of financial position as at 31 March 20X6?1.The answer is $39.3M
2. The $2.7 has been deducted and cost of goods sold has been added($6M).
3. Could you explain why?“The $2.7 has been deducted” – because those goods were not in inventory as at 31 March but they were included within the figure of $36 million as at 4 April … so we need to take them out of that $36 million to find out how much was in hand at the end of March
Similarly, $7.8 million goods sold at a mark up of 30% (therefore cost of those sales was $6 million) were NOT included within the $36 million but those $6 million goods WERE in hand as at the end of March so we need to add $6 million to $36 – $2.7 + $6 giving us inventory as at the year end of $39.3 million
Better?
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