InventoriesQ-1 | Valuation of InventoriesQuestion 5059 of 22
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The following are the details of a spare part of Sriram Mills : 1-1-2016 Opening Stock Nil 1-1 Purchases 100 units @ Rs. 30 per unit 15-1 Issued for consumption 50 units 1-2 Purchases 200 units @ Rs. 40 per unit 15-2 Issued for consumption 100 units 20-2 Issued for consumption 100 units 1-3 Purchase 150 units @ Rs. 50 per unit 15-3 Issued for consumption 100 units Find out the value of stock as on 31-3-2016 if the company follows: 1. First in First Out basis 2. Last in First Out basis 3. Weighted Average basis [RTP Jan. 2025, Modified]

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Detailed Solution & Explanation

Stores card/ Stores ledger FIFO METHOD Item - Spare parts ➔ Method of Valuation of issues ➔ FIFO Date Receipt Issue Balance 2016 Particulars V. No. Qty Rate Amt. Qty Rate Amt. Oty. Rate Amt 1.1 1.1 Opening Bal. Purchase 100 30 3000 30 - 3000 15.1 Issue 50 30 1500 50 30 1500 1.2 Purchase 200 40 8000 50 200 30 40 1500 8000 15.2 Issue 100 50X30 50X40 1500 2000 150 40 6000 20.2 Issue 100 100X40 4000 50 40 2000 1.3 Purchase 150 50 7500 50 150 40 50 2000 7500 15.3 Issue 100 50X40 2000 2500 100 50 5000 Total 450 18500 350 13500 100 5000Qty. Value Purchases Consumption 450 350 18,500 13,500 Closing Stock (Cost by FIFO method) 100 5,000 Without making stores card, if we simply value the stock of 100 units from the last lot because the earlier lots have been issued, we get the same valuation 100 units@ 50 = 5,000. LIFO METHOD Item - Spare parts ➔ Method of Valuation of issues -➔ UFO Date Receipt Issue Balance 2016 Particulars V. No. Qty Rate Amt. Qty Rate Amt. Oty. Rate Amt 1.1 Opening Bal. - - - 1.1 Purchase 100 30 3000 100 30 3000 15.1 Issue 50 30 1500 50 30 1500 1.2 Purchase 200 40 8000 50 200 30 40 1500 8000 15.2 Issue 100 40 4000 50 100 30 40 1500 4000 20.2 Issue 100 40 4000 50 30 1500 1.3 Purchase 150 50 7500 50 150 30 50 1500 7500 15.3 Issue 100 50 5000 50 50 30 50 1500 2500 Total 450 18500 350 14500 100 4000 Qty. Value Purchases Consumption 450 350 18,500 14,500 Closing Stock (Cost by LIFO method) 100 4,000 Alternatively: The shortcut valuation of closing stock by LIFO i.e. without preparing stores card, would have been 100 units @30 = 3,000. It differs from the above valuation which is more correct if date wise issue is known. WEIGHTED AVERAGE METHOD Item - Spare parts ➔ Method of Valuation of issues ➔ Weighted Average· Method Date Receipt Issue Balance 2016 Particulars V. No. Qty Rate Amt. Qty Rate Amt. Oty. Rate Amt 1.1 Opening Bal. - - - 1.1 Purchase 100 30 3000 100 30 3000 15.1 Issue 50 30 1500 50 30 1500 1.2 Purchase 200 40 8000 250 38 9500 15.2 Issue 100 38 3800 150 38 5700 20.2 Issue 100 38 3800 50 38 1900 1.3 Purchase 150 50 7500 200 47 9400 15.3 Issue 100 47 4700 100 47 4700 Total 450 18500 350 13800 100 4700 Qty. Value Purchases Consumption 450 350 18,500 13,800 Closing Stock (Cost by Weighted method) 100 4,700 Alternatively periodic weighted average can be applied say quarterly weighted average= 3000+8000+7500/100+200+150 = 41.11 Closing stock= 41.1 1 X 100 = 4111 Qty. Value Purchases Consumption 450 350 18,500 14,389 Closing Stock (Cost by Weighted method) 100 4,111

About This Chapter: BRS & Inventories

Paper

Paper 1: Accounting

Weightage

20-25%

Key Topics

Reconciliation, Valuation, Depreciation

This chapter covers Reconciliation, Valuation, Depreciation and is part of Paper 1: Accounting in the CA Foundation exam.

View Official ICAI Syllabus

Exam Strategy Tip

This topic carries 20-25% weightage. Focus on understanding core concepts rather than memorizing.

More Questions from Inventories

From the following information, prepare a Bank Reconciliation Statement as on June 30, 2024 for M/ s. XYZ Limited: i. The Bank column. of Cash Book was overdrawn to the extent of ₹24,768. ii. Bank charges amounting to ₹350 had not been entered in the Cash Book. iii. Cheque amounting to ₹88,678 issued before June 30, 2024 but not yet presented to bank. iv. One payment of ₹4,590 was recorded in the Cash Book as if there is no bank column. v. The company paid ₹15,500 to a creditor and received a cash discount @ 2%. The cashier erroneously entered the gross amount in the bank column of the Cash Book. vi. A debit of ₹ 5,700 appeared in the Bank Statement for an unpaid cheque, Which had been returned marked 'out of date'. The cheque had been re-dated by the customer and paid into the Bank again on July 8, 2024. vii. Cheques deposited in bank but not yet cleared amount to ₹45,789. viii. Dividends of ₹ 1,980 collected by the Bank was not recorded in the Cash Book. ix. Amount of ₹ 2,340 wrongly credited by bank to company account for which no details are available. x. On June 25, 2024 the credit side of bank column of the Cash Book was overcast by ₹6,789. [Jan. 2025, 10 Marks]

The following are the details of a spare part of Sriram Mills : 1-1-2016 Opening Stock Nil 1-1 Purchases 100 units @ Rs. 30 per unit 15-1 Issued for consumption 50 units 1-2 Purchases 200 units @ Rs. 40 per unit 15-2 Issued for consumption 100 units 20-2 Issued for consumption 100 units 1-3 Purchase 150 units @ Rs. 50 per unit 15-3 Issued for consumption 100 units Find out the value of stock as on 31-3-2016 if the company follows: 1. First in First Out basis 2. Last in First Out basis 3. Weighted Average basis [RTP Jan. 2025, Modified]

From the following particulars for the years 2014 and 2015, determine the value of the closing stock at the end of 2015. 2014 2015 Opening Stock Consumption Sales 20,000 1,20,000 2,00,000 30,000 1,90,000 2,40,000 Uniform rate of gross profit may be assumed. At the end of 2015, goods purchased were received, but no entry was made for this credit purchase since invoice was not received. These goods cost Rs. 20,000.

X who was closing his books on 31-3-2016 failed to take the actual Stock which he did only on 9th April, 2016, when it was ascertained by him to be worth Rs. 25;000. It was found that sales are entered in the sales book on the same day of dispatch and return inwards in the return book as and when the goods are received back. Purchases are entered in· the purchases day book· once the invoices are received. It was found that sales between 31-3-2016 and 9-4-2016 as per the sales day book are Rs. 1,720. Purchases between 31-3-2016 and 9-4-2016 as purchase day book are Rs. 120, out of these goods amounting to Rs. 50 were not received until after the stock was taken; Goods invoiced during the month of March, 2016 but goods received only on 4th April, 2016 amounted to Rs. 100. Rate of gross profit is 33 1 / 3% on cost. Ascertain the value of physical stock as on 31-3-2016.

From the following particulars ascertain the value of inventories as on 31st march, 2020 Inventory as on 1st April, 2019 - Rs. 3,50,000 Purchase made during the year - Rs. 12,00,000 Sales - Rs. 18,50,000 Manufacturing Expenses - Rs. 15,00,000 Selling and Distribution Expenses - Rs. 50,000 Administration Expenses - Rs. 80,000 At the time of valuing inventory as on 31st March, 2019, a sum of Rs. 20,000 was written off on a particular item which was originally purchased for Rs. 55,000 and was sold during the year for Rs. 50,000. Except the abovementioned Transaction, gross profit earned during the year was 20% on sales. [Jan. 2021, 5Marks]

From the following information, calculate the historical cost of closing inventories using adjusted selling price method : Purchase during the year - Rs. 5,00,000 Sales during the year - Rs.7,501000 Opening Inventory - Nil Closing Inventory at selling price – Rs. 1,00,000 [July 2021, 5 Marks]; [RTP Jan. 2025; Modified Figures• 2X]

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