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Vvictor6y ago
Dear Mr. John As per your lecture method to calculate the closing inventory Inventory value Less: Purchase of Goods Add: Sale of Goods Add: Returned outwards But the below example says: The company value its inventory using FIFO method At 1 may 700 each $190 and below transaction: 1 july purchased 500 engines at $ 220 each 1 Nov Sold 400/- for $ 160000 1 February purchased 300 engines at 230 each 15 April sold 250 engines for $ 125000 What is the value of closing inventory? 50*190=9500 500*220=110000 300*230=69000 Total =188500 Here purchased added and sold of goods deducted from inventory value 700@190 Why is opposite then then above solution? 2. Opening asset 569400 at 1-01-2008 Opening liabilities -412840 at 01-01-2008 Capital Introduced =65000 Drawing = 800*12= -9600 =211960 What is name of the balance? AND 31-12-2008 Dec= ASSET $614130 and liabilities 369770 =244360 closing net asset What is the profit? And answer is (211960-244360) =32400 profit ? Need you advice for both the solution? finding complicated. Regards, Victor
John MoffatJohn MoffatTutor6y ago#1
1. Nowhere in any of my lectures do I say what you have written in your first paragraph!! That would be ridiculous. The inventory left at the end of the period is what was bought during the period less what was sold. The example you have written out is testing on the valuation of the closing inventory using the first-in-first-out method. So the 850 units that are left are valued at whatever the cost of them was on the assumption that they are the most recent purchases. I work through example 5 of Chapter 9 in the free lecture notes in my free lectures on that Chapter, which explains how we value inventory using FIFO. 2. Your second example is testing on the accounting equation. The change in net assets over the period is equal to profit less drawings plus any capital introduced. I explain this in my lectures working through Chapter 2 of our free lecture notes.
Vvictor6y ago#2
Dear Mr. John Total of most resent purchase =500+300=800 and 850-800=50 calculate on opening inventory cost per unit price .I suppose it is correct Need conformation? AND 2nd Opening Asset -Opening liab = Capital or Net asset ? Regards Victor
John MoffatJohn MoffatTutor6y ago#3
Your first bit is correct. Net assets = assets - liabilities Net assets = capital Have you watched my free lectures on this? :-)
Vvictor6y ago#4
Dear Mr. John I did watch .. Its perfectly understand now. Thank you victor
John MoffatJohn MoffatTutor6y ago#5
You are welcome :-)
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