Hello Ltd. purchased goods at the cost of Rs.20 lakhs in October.
24 views 0 purchase
Course
Accounting
Institution
Accounting
Book
CFIN
Answer to question:
Hello Ltd. purchased goods at the cost of Rs.20 lakhs in October. Till the end of the financial year, 75% of the stocks were sold. The Company wants to disclose closing stock at Rs.5 lakhs. The expected sale value is Rs.5.5 lakhs and a commission at 10% on sale is payable to th...
Question:
Hello Ltd. purchased goods at the cost of Rs.20 lakhs in October. Till the end of the financial year, 75% of
the stocks were sold. The Company wants to disclose closing stock at Rs.5 lakhs. The expected sale value
is Rs.5.5 lakhs and a commission at 10% on sale is payable to the agent. You are required to ascertain the
value of closing stock?
Answer:
According to accounting standards “Valuation of inventory”, inventory is valued at lower of cost or net
realizable value. The net realizable value is the difference between sales revenue and selling expenses.
Working for net realizable value
Sales Commission = Sales * Sales Commission %
= 550000*10%
= 55000
Working for value of closing stock using lower of cost or NRV method
Cost of inventory = 500000
Net Realizable Value = 495000
Value of closing stock = Lower of cost of inventory or net realized value
= 500000 – 495000
= 5000
As per “Valuation of inventories”, inventory is valued at lower of cost of inventory or net realizable value
of inventory.
The cost of inventory is 5,00,000 and net realizable value is 4,95,000. So, the value of closing stock
should be valued at 4,95,000.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller itstutiontime. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $2.99. You're not tied to anything after your purchase.
