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Hi Mike , pls I have a question on high wood .
The inventory of high wood was not counted until 4 the April 20×6 due to operational reasons. At that date its value at cost was 36 million and the fig has been used in the cost of sales calculation above . Between the yrbend of 31 march 20×6 and April 20×6. High wood received a delivery off goods at a cost of 2.7 million and made sales of 7.8 million at a mark_up on a cost of 30%.Neither the goods delivered nor the sales above was made in this period were included in high woods purchase as art of cost or revenue in the trial bal.
Pls thought in the answer we were going to adjust in the revenue but no . The adjustedment was only in the cos , inventory and trade recievable . Pls don’t really understand the adjusting most especially in published account when it comes to revenue, cos etc ,pls if u can clear me . ThanksThe question that you have posted explains the issue!
“Neither the goods delivered nor the sales above was made in this period were included in high woods purchase as art of cost or revenue”
The goods sold in that 4 day post year-end period were NOT included within the revenue for the year and that is correct … they should not be included within the revenue for the year because they were post year-end sales
Now, I have a problem!
Are you 100% certain that the receivables figure has been adjusted for these after-date sales? I don’t believe that they should be.
In my mind the adjustment is to closing inventory on the statement of financial position and to the figure of closing inventory as used within the calculation of cost of sales
An increase in closing inventory of $3.3 million will reduce cost of sales by that amount and this increase the reported profit for the year
This increase in profit will be balanced out on the statement of financial position by the increase in inventory within current assets by the same figure
OK?
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