The following details are available of raw material of a manufacturing unit: | Date | Transaction | Units / Rate | | :--- | :--- | :--- | | 1-5-202...

Question

The following details are available of raw material of a manufacturing unit : 1-5-2024 Opening Inventory 100 units @ Rs. 15 per unit 2-5-2024 Purchases 300 units @ Rs. 18 per unit 5-5-2024 Issued for consumption 250 units 16-5-2024 Purchases 500 units @ Rs. 21 per unit 21-5-2024 Issued for consumption 100 units 25-5-2024 Issued for consumption 450 units The manufacturer also incurred the following expenses: ◆ Freight of 300 and unloading charges of 150 at the time of every purchase respectively. ◆ Warehouse rent of ₹ 2,000 per month. ◆ Administrative Expenses of ₹ 1,500 per month. You are required to find out the value of inventory as on May 31, 2024 if the company follows: (a) Weighted Average method for inventory valuation. (b) First in First Out method for inventory valuation. [Jan. 2025, Marks 5]

Meaning of depreciation

Sum of Years of Digits Method

Depletion method

Discuss the factors taken into consideration for calculation of depreciation. [Nov. 2020, 5 Marks]

Amortisation [Dec. 2021, 1 Mark]

Accepted Answer

Answer Solution: (a) STOCK LEDGER (Under Weighted Average method) | Date 2024 | Receipt | | | Issue | | | Balance | | | | :--- | :---: | :---: | :---: | :---: | :---: | :---: | :---: | :---: | :---: | | | Qty (units) | Rate (Rs.) | Amt (Rs.) | Qty (units) | Rate (Rs.) | Amt (Rs.) | Qty (units) | Rate (Rs.) | Amt (Rs.) | | 1st May | — | — | — | — | — | — | 100 | 15 | 1500 | | 2 May | 300 | 19.51 | 5850 | — | — | — | 400 | 18.38 | 7350 | | 5 May | — | — | — | 250 | 18.38 | 4595 | 150 | 18.37 | 2755 | | 16 May | 500 | 21.92 | 10950 | — | — | — | 650 | 21.08 | 13705 | | 21 May | — | — | — | 100 | 21.08 | 2108 | 550 | 21.09 | 11597 | | 25 May | — | — | — | 450 | 21.09 | 9491 | 100 | 21.06 | 2106 | Value of inventory as on 31 May is Rs. 2,106 [100 units @ 21.06] (b) First in First Out method for inventory valuation. STOCK LEDGER (Under FIFO Method) | Date 2024 | Receipt | | | Issue | | | Balance | | | | :--- | :---: | :---: | :---: | :---: | :---: | :---: | :---: | :---: | :---: | | | Qty (units) | Rate (Rs.) | Amt (Rs.) | Qty (units) | Rate (Rs.) | Amt (Rs.) | Qty (units) | Rate (Rs.) | Amt (Rs.) | | 1st May | — | — | — | — | — | — | 100 | 15 | 1500 | | 2 May | 300 | 19.51 | 5850 | — | — | — | 100 300 | 15 19.5 | 1500 5850 | | 5 May | — | — | — | 100 150 | 15 19.5 | 1500 2925 | 150 | 19.5 | 2925 | | 16 May | 500 | 21.92 | 10950 | — | — | — | 150 500 | 19.5 21.9 | 2925 10950 | | 21 May | — | — | — | 100 | 19.5 | 1950 | 50 500 | 19.5 21.9 | 975 10950 | | 25 May | — | — | — | 50 400 | 19.5 21.9 | 975 8760 | 100 | 21.9 | 2190 | Value of inventory on 31 May is Rs. 2,190 [100 units @ 21.9] Working Notes: 1. 300 × Rs. 18 = Rs. 5,400 + Rs. 450 [300 + 150] = 5,850 @ 19.5/- 2. 500 × Rs. 21 = Rs. 10,500 + 450 = Rs. 10,950 @ 21.9/-

Detailed Solution & Explanation

About This Chapter: BRS & Inventories

Key Concepts to Understand

Depreciation

Weighted Average Method

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