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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 outwardsBut 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,
Victor1. 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.
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
VictorYour first bit is correct.
Net assets = assets – liabilities
Net assets = capitalHave you watched my free lectures on this? 🙂
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