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it says, end of sept 2003 closing inventory 386400. BPP revision kit page 9 question 8, i am gonna write it short.
following items were included in this total at cost. i am skipping the second option, has no effect.
1-1000 items which had xost 18 each and sold in October for 14.2 (selling less exp)
what figure should appear in the company’s stmtn of fin. position at 30 sept. 2003.i understand how the calculation is carried out but what i dont gee is if the SFP prepared for year ending 30 sept why do we go back and adjust the inventory. they are sold following year s. next financial year.. i can not get this.
thanks in advance
We are not adjusting for sales, we are adjusting for the value of inventory. This transaction is giving us a hint that an item, that we had valued as $18, is actually supposed to be valued at $14.2. So since we had over valued it by $3.8, we shall deduct this overvalued amount from our inventories.
The items were sold in the next financial year, and so their sales will be accounted for next year, not in current year. Its only giving us the information that we have overvalued an item of $18.
Actually, even I was confused with this question earlier, a similar entry is there in qn 28, under further info. avavilable, point 4, page 40.
I hope that it’s clear to you now..Please rate my comment if you’re satisifed…:D
A product might be 100 quid now 6 month later 50 quid on sale. how far you can go back to revalue the inventory?
thanks for the explanation. what is this rating for? i give five star. very good
(SQ) you are correct ! what i think is that According to prudence concept stock should be valued either lower cost or market value so in this question previous year stock was over valued simply we subtract the difference to give correct value which is according to question is NRV. Leymal asked why we change the previous SFP because it is sold this year, the answer is sale should be counted in current year but previous years closing inventory should be adjusted according to {IAS 10} because it was a material event whose condition was existing at the reporting date(closing date of SFP) and if the sales were before the approval date otherwise (if after) it will be non adjusting event but this case was not given in the question but you should remember this. I hope that i satisfied your question.Any one correct me if i am wrong beacuse we all are here to share knowledge!
any further help feel free!@leymal said:
A product might be 100 quid now 6 month later 50 quid on sale. how far you can go back to revalue the inventory?thanks for the explanation. what is this rating for? i give five star. very good
You can go back only to the immediate previous year prior to current year. The logic behind this is that when we prepare a company’s balance sheet, we show the assets and liabilities of both current yr and previous year, to make it easy for the users to compare the positions in the two years. So when the bal sheet for sept 2004 is prepared, it will also incorporate the bal sheet of pd ended sep 2003 in it.. You must have seen a few examples in ur book of such a bal sheet..
i don’t really know what’s the rating for, but what i do is if i like a comment i give a thumbs up to it…:)
@abdulwahabsiddiq said:
(SQ) you are correct ! what i think is that According to prudence concept stock should be valued either lower cost or market value so in this question previous year stock was over valued simply we subtract the difference to give correct value which is according to question is NRV. Leymal asked why we change the previous SFP because it is sold this year, the answer is sale should be counted in current year but previous years closing inventory should be adjusted according to {IAS 10} because it was a material event whose condition was existing at the reporting date(closing date of SFP) and if the sales were before the approval date otherwise (if after) it will be non adjusting event but this case was not given in the question but you should remember this. I hope that i satisfied your question.Any one correct me if i am wrong beacuse we all are here to share knowledge!
any further help feel free!The sales took place in the next year…so we wont make any changes in sales..
thank you guys.
are you saying that you can’t revalue or adjust the inventory once the the SFP is approved ?
i hate the reading bits may be i should go back and read IAS10.
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