Inventory Management, Valuation, and Financial Reporting Principles Questions and Answers

Inventory Management, Valuation, and Financial Reporting Principles Questions and Answers Movement of Inventory Q For the year ended 31 October 20X3 a company carried out a physical count of inventory on 4 November 20X3, leading to an inventory cost at this date of £483,700. The following transactions took place between 1 November 20X3 and 4 November 20X3: (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 them 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. Requirement What amount should be shown in the company's financial statements at 31 October 20X3 for closing inventory? Movement of Inventory A do the opposite of what is happening = £461,500 How to measure inventory at LOWER of cost and NRV NRV = rev expected to be earned - selling cost or modification costs to enable sale eg. selling expenses At its year end Crocodile plc has 6,000 items of product A costing £10 per unit, and 2,000 items of product B costing £5 per unit. The following information is available: Product A - 500 are defective and can only be sold at £8 each. Product B - 100 are to be sold for £4.50 each with selling expenses of £1.50 each. Requirement What amount should be shown in Crocodile plc's statement of financial position for inventory? The closing inventory of Epsilon Ltd amounted to £284,000 at cost at the year end of 30 September 20X1. This total includes the following two inventory lines. (1) 500 items which had cost £15 each and which were included at £7,500. These items were found to have been defective at the date of the statement of financial position.Remedial work after that date cost £1,800 and they were then sold shortly afterwards for £20 each. Selling expenses were £400. (2) 100 items which had cost £10 each. After the date of the statement of financial position they were sold for f8 each, with selling expenses of £150. Requirement What amount should be shown in Epsilon Ltd's statement of financial position for inventory at 30 September 20X1? = 283, 650 add back understated value stolen or destroyed inventory these will have a value of 0 insurance claim will be included as other income after gross profit treatment: Dr admin expense the cost Cr purchases to deduct cost from purchases Cr other income for insurance claim