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  • FIN621 Assigenment

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    Sadaf Naaz
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    1. The document is a letter from Mr. Ijaz requesting an accountant to prepare the financial statements for his cement trading business for the year ended December 31, 2010. 2. It provides information on purchases and sales of cement bags during the year under the FIFO and weighted average costing methods to calculate cost of goods sold and ending inventory. 3. FIFO method results in a lower cost of goods sold and higher reported earnings, while weighted average method results in a higher cost of goods sold and lower reported earnings.

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    1. The document is a letter from Mr. Ijaz requesting an accountant to prepare the financial statements for his cement trading business for the year ended December 31, 2010. 2. It provides information on purchases and sales of cement bags during the year under the FIFO and weighted average costing methods to calculate cost of goods sold and ending inventory. 3. FIFO method results in a lower cost of goods sold and higher reported earnings, while weighted average method results in a higher cost of goods sold and lower reported earnings.

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    Attribution Non-Commercial (BY-NC)
    Download as DOC, PDF, TXT or read online from Scribd
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    21 views2 pages

    FIN621 Assigenment

    Uploaded by

    Sadaf Naaz
    1. The document is a letter from Mr. Ijaz requesting an accountant to prepare the financial statements for his cement trading business for the year ended December 31, 2010. 2. It provides information on purchases and sales of cement bags during the year under the FIFO and weighted average costing methods to calculate cost of goods sold and ending inventory. 3. FIFO method results in a lower cost of goods sold and higher reported earnings, while weighted average method results in a higher cost of goods sold and lower reported earnings.

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    FIN621 Assigenment # 2 Soluation SEMESTER FALL 2011 Financial Statement Analysis (FIN621) Assignment No. 2 Pr!ncE Q: 1 Mr.

    Ijaz newly started trading business as cement supplier in 2010 in Lahore. He requested you to act as his accountant (For the year ended on 31st December 2010). His instructions to you are in the form of following letter written in April, 2010: ANS: Cost of sold goods under FIFO 2 000 bags @ Rs 150 = RS 300, 000 3000 bags @RS 156 = RS 468, 000 TOTAL = 5000 BAGS = RS .768, 000 COST OF SOLD GOODS UNDER WEIGHTED AVERAGE PURCHASE 2000 BAGS@ RS.150 PER BAG = RS .300, 000

    3500 BAGS @RS156 PER BAG = RS.546, 000

    4500 BAG@ RS.158 PER BAG = RS.711,000

    TOTAL BAGS = 10, 000 TOATAL PRICE = RS.1557, 000

    WEIGHTED AVERAGE PRICE PER BAG = 1557, 000 / 10000 WEIGHTED AVERAGE PRICE PER BAG = RS.155.7 per bag TOTAL SALE = 5, 000 BAGS COST UNDER WEIGHTED AVERAGE = 5, 000 155.7 COST UNDER WEIGHTED AVERAGE = RS 778,500

    ENDING INVENTORY UNDER FIFO METHOD

    OPENING BALANCE = 000 ADD PURCHASE = 1557,000

    LESS CLOSING BALANCE = 789, 000 INVENTORY USED =768,000

    UNDER WEIGHTED AVERAGE METHOD

    OPENING BALANCE = 000 ADD PURCHASE = 1557,000 LESS CLOSING BALANCE = 779,000 INVENTORY USED =778,000

    Q:2 Identify which of the following methods (FIFO or Weighted Average) will tend to raise the quality of companys earnings and which will tend to lower? Support your answer with valid reasoning. ANS: FIFO tend to raise the quality of the companys earning cost of good sold is lower FIFO method used.

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