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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%.Why do u minus 2.7 and add 7.8 to 36?
Q2) At 31 March 20X7 Tentacle had 12,000 units of product W32 in inventory, included at cost of $6 per unit.
During April and May 20X7 units of W32 were being sold at a price of $5.40 each, with sales staff receiving a
15% commission on the sales price of the product.
At what amount should inventory of product W32 be recognised in the financial statements of Tentacle as at
31 March 20X7?April and may 2007 is after 31marc 2007, so why do u need consider wat happens after this?
, and can u explain me how to do this?
12k*6-(0.85*5.40)??Because inventory was counted and valued as at 4 April. The $2.7 million has been included in that figure but wasn’t in inventory as at 31 March – it was received only AFTER 31 March
Add 7.8? I hope not! We should be adding only the cost value of the sales of $7.8 million. Sales of $7.8 million at a mark up of 30% have a cost of sales of $6 million and they WERE in inventory as at 31 March but have not been included in the valuation as at 4 April because they weren’t there – they’d been sold
“April and may 2007 is after 31marc 2007, so why do u need consider wat happens after this?
, and can u explain me how to do this?
12k*6-(0.85*5.40)??” – lower of cost and net realisable value!Nrv for product W32 appears to be not $6 as included in the inventory valuation. Instead, nrv per unit appears to be ($5.40 – 15% x $5.40) and that amounts to $4.59 per unit
Inventory that has been included at $72,000 SHOULD be included at only 12,000 x $4.59 = $55,080
A deduction / reduction of $16,920 in inventory would seem to be appropriate
okay thnks
2 weeks more, now Im onto past papers, bit of hectic schedule now, I find lease,revenue and tax topics much harder
what do u mean, how can I get hold of those? suggest me a way of getting on top?
That’s just practice
You never responded to my earlier post about the inventory adjustments – did I get them correct?
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