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Hi John, can you help me again, please?
When doing this kind of question I am not sure how to threat goods returned.
Will I always just think about the period, no matter what happen to the goods after the year end?A company with an accounting date of 31 October carried out a physical check of inventory on 4
November 20X3, leading to an inventory value at cost at this date of $483,700.
Between 1 November 20X3 and 4 November 20X3 the following transactions took place:1 Goods costing $38,400 were received from suppliers.
2 Goods that had cost $14,800 were sold for $20,000.
3 A customer returned, in good condition, some goods which had been sold to him in October for
$600 and which had cost $400.
4 The company returned goods that had cost $1,800 in October to the supplier, and received a
credit note for them.
What figure should appear in the company’s financial statements at 31 October 20X3 for closing
inventory, based on this information?ANS: (483700 -38400 + 14800 -400 +1800) = $461,500
You need to work backwards.
They had received goods, so they were not there at 31 October – so you need to remove them.
They sold goods, so they were there at 31 October – so you need to add them (but at cost, because inventory is valued at cost)
The returned goods to the supplier, so they were there at 31 October – so you need to add them.
Customers returned goods, so they were not there at 31 October – so you need to remove them (again at cost)
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