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MA Chapter 5 Questions Ordering and Accounting for Inventory

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  3. In the first question, it is asking which department is resonsible for completing the purchase requisition, it can be raised by the department that requires the goods but isn’t it the duty of the purchase department to complete the requsition by reviewing and ordering the materials from the requistion note? Isn’t here asking for the completion of the purchase requistion note? The department that requires the goods can raise the requisition note but it will be completed by the purchasing department after issuing the purchase order form, isn’t it?

    • No. As explained in our notes and lectures, the requisition is prepared by the department that wants the goods. The purchase department might well check it (but this is not ‘completing it’ – there is nothing to complete), but they will then prepare the purchase order.

  8. Sir i have a doubt. One of the questions read:

    Which two of the following would be received from a supplier?

    I understand that goods delivery note and purchase invoice would be sent by the supplier.
    But i was just thinking why not goods despatched note also? That is also sent by the supplier.Isn’t it?

    • No. The supplied would keep the goods despatch note. it is prepared by the department that despatched the goods. One copy will be kept in that department and another copy will be sent to the accounts department so that they can then prepare the invoice.

  13. On the LIFO question isn’t the answer supposed to be $465?
    The first issue would be deducted from the opening bal leaving 60 units
    The second issue of 70 would be taken 50 units from 26th August and 20 units from 14 August
    That leaves remaining inventory of (60 @ $5) + (30 @ $5.5) = $465

      • The question is not asking you to value the closing inventory (in which case what hansiezefy has written would be correct).

        The question is asking for the value of the issue on 29 August, and the pop-up answer is correct.

    • You are asked to find value of the issue on 29 August (it is 70 units). As LIFO is last in first out, you need to identify the cost of this remaining inventory by the cost of last receipts. For example, the cost of last receipt on 26 August is $6 per unit, but it is not enough for 70 units because there only 50. That’s why, from 50 receipts on 14 August which is $5.50 per unit cost, we take the cost of 20 units in order to find the value of 70 remaining inventory. Finally, (50*$6.00)+(20*$5.50)=$410

  15. The LIFO question is confusing me. I’m not sure from the answers whether you worked out using FIFO rather than LIFO. Also, I got a closing inventory of ’90’ (100-40+50+50-70) rather than the ’70’ on the answers. Unless I am misunderstood?

    • The answer has been worked out using LIFO.

      Also, the question does not ask for the value of the closing inventory. It asks for the value of the issue on 29 August, and the issue was of 70 units. 50 of them were from the most recent purchase and the other 20 were from the one before.

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