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beta co has total assets of $650,000 and profit for the year $150,000 recorded in the financial statements for the year ended 31 December 20X3. Inventory costing $50,000,with a resale value of $75000,was received into the warehouse on 2 January 20X4 and included in the inventory value that was recorded in the financial statements at 31 December 20X3.
What would the total assets figure in the statement of financial position,and the adjusted profit for the year figure, be after adjusting for this error?
Please do not simply set me test questions and expect an answer!!
You must have an answer in the same book in which you found the question. Ask about whatever it is in the answer that you are not clear about and then I will help you 🙂
Since the inventory was not received until after the 31 December, it should not have been included in the financial statements for 30 December 20X3, and this therefore needs adjusting for.
Have you watched my free lectures on adjustments to profit? The lectures are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.
I’m sorry for that sir, yes i have watched your all lectures of F3
the answer in the revision kit says,
Total assets (SOFP) : $600,000
Profit for the year : $100,000My questions are
1)so the profit reduces bcz closing inventory decreases by 50,000 therefore cost of sales increases therefore the profit decreases by 50,000 , is that correct ?2) Not including the inventory that is received after the reporting date, does this also relate to the non adjusting and adjusting events after the reporting period ?
1. Yes, that is correct 🙂
2. No. The statements should show the position as at the reporting date. Since the inventory had not been received at the reporting date it should not have been included. Adjusting and non-adjusting events relates to information after the reporting date that affects the value of things as at the reporting date, which is not the same thing.
thank you i understood 🙂
I have my F3 exam on 17th jan,
do you have any tips for me as i’m giving CBE bcz the revision kit questions do not really match the format of CBU questions.I don’t know which revision kit you are using, but certainly the current edition of the BPP Revision Kit has plenty of CBE type questions.
All you can do is keep practicing – the format of the question does not matter so much because the level of difficulty remains the same.
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