Practical Problems:

Calculation of NRV

1. Mr. Sunshine is a retailer. During the accounting year ending on 31.03.2019 he

purchased 500 units @350 each and sold 450 units @550 each, through his agent
who charged a commission of 10% on sales. Mr. Sunshine also paid ₹8000 as
expenses. But towards the end of this year the market price fell down to ₹ 250 per
unit. Calculate the unsold stock as per NRV?

Solution:

CP = Rs. 350pu

Unsold stock = 500 - 450 = 50 units

Market Price = Rs 550 pu

New Market Price= Rs. 250 pu

Particulars Rs.
Value of unsold stock (50 x 250) 12500
(at MP which is lower than the CP)
LESS: Probable marketing expense (Commission 1250
@ 10 % of 12500)
NRV 11250

2. From the following particulars, ascertain the value of inventory on 31.03.20, the closing date
of the financial year of a trader:

Normal Capacity of production 20000 units

Fixed production overhead charges on normal capacity 40000

Direct Material Cost Rs 80 pu

Direct Labour Cost Rs 40 pu

Variable Production overhead Rs 8 pu

Actual production 18000 units

Units sold 15000 units

Selling Price Rs 220 pu

Solution:

Cost pu of finished goods

Particulars Rs
DM 80
DL 40
Fixed Overhead (Acc to AS 2 Fixed production overhead should be absorbed to 2
production over normal capacity. So, it is Rs 40000/ 20000 units)

Variable Production Overhead 8

130

Market Price pu is 220

Units of unsold stock = 18000 - 15000 = 3000 units

Value of Inventory = 3000 x 130 = 390000

3. The company deals in three products X,Y,Z which are neither similar nor interchangeable. At
the time of closing of its accounts for the year 2019-20 , the Historical Cost and NRV of the
items of closing stock are determined as follows:

Items Historical Cost Net Realizable Value

X 40 28

Y 32 32

Z 16 24

What will be the value of closing stock?

Solution:

Items Historical Cost Net Realizable Value Valuation of CS

X 40 28 28

Y 32 32 32

Z 16 24 16

88 84 76
 Value of closing stock will be 76 lakh

4.An Air-conditioner dealer purchases AC machine for Rs. 35000 per unit from the manufacturer.
They installed the machine at customer’s premise without charging any extra amount. For this
purpose, they appointed R who is paid Rs. 1500 for every installation.

On March 31, 2020, 120 units were held as stock.

If the retail sale price of each unit is Rs. 36000, determine the value of the unsold stock on
that date.

Solution:

As per Ind As- 2, closing stock should be valued at cost or NRV, whichever is lower.
Statement showing valuation of stock on 31.3.2020

Particulars Rs.
Cost of AC p.u. (A) 35,000
Net Realisable value (B):
Market price or retail sale price p.u. 36,000
Less: Estimated expenses in connection to sale 1,500
NRV 34,500

Value of AC p.u. (lower of A and B) 34,500

Value of stock as on 31.3.2020 (120 * Rs. 34500) 41,40,000

5. From the following data, you are required to estimate the value of stock at the end of the
financial year 31.3.2020 as per Ind AS 2:

Categories of Direct materials Attributable Estimated Expected

stock (Rs.) production selling expenses Market price
overhead
Product X 42000 8400 3200 50800
Product Y 28900 10700 3900 51900

Solution:

Statement showing valuation of stock on 31.3.2020

Particulars X (Rs.) Y (Rs.)

Cost of raw materials 42000 28900
Add: Attributable production overhead 8400 10700
Total cost (A) 50,400 39,600

Expected Market price 50800 51900

Less: Estimated selling expenses 3200 3900
NRV (B) 47600 48000
 Value of stock as on 31.03.2020 [Lower of A and B] 47,600 39,600

Stores Ledger:
6. Following information about raw materials are available in respect of a manufacturing
concern:

1.05.2020 Purchased 3000 kg @ Rs. 15/ kg

3.05.2020 Purchased 5000 Kg @ Rs. 16/Kg
7.05.2020 Issued 5000 Kg
8.05.2020 Purchased 2000 Kg @ Rs. 18/Kg

Determine the value of stock on May 8, 2020, under FIFO Method.

Solution:

Stores Ledger (FIFO Method)

Date Receipts Issues Balance Remarks

GRN. Qnty Rate Rs. SRN. Qnty. Rate Rs. Qnty. Rate Rs.
1.05.2020 3000 15 45000 3000 15 45000
3.05.2020 5000 16 80000 3000 15 45000
5000 16 80000
7.05.2020 - - - 45000 3000 16 48000
3000 15 32000
2000 16
8.05.2020 2000 18 36000 3000 16 48000
2000 18 36000

7.From the following transactions extracted from the books of accounts of a manufacturing
concern as on 31st December 2019 prepare stores ledger under FIFO method, LIFO method and
Weighted Average method.

Date Particulars Quantity (units) Rate p.u. (Rs.)

2019 December
1 Opening stock 300 9.70
3 Purchases 250 9.80
11 Issues 400 -
15 Purchases 300 10.05
20 Issues 210 -
25 Purchases 150 10.30
29 Issues 100 -

Solution:

Stores Ledger (LIFO Method)

Date Receipts Issues Balance Remarks
GRN. Qnty Rate Rs. SRN. Qnty. Rate Rs. Qnty. Rate Rs.
1.12.2019 300 9.70 2,910
3.12.2019 250 9.80 2,450 300 9.70 2,910
250 9.80 2450
11.12.2019 - - - 250 9.80 2450 150 9.70 1455
150 9.70 1455
15.12.2019 300 10.05 3,015 150 9.70 1455
300 10.05 3015
20.12.2019 - - - 210 10.05 2111 150 9.70 1455
90 10.05 905
25.12.2019 150 10.30 1,545 150 9.70 1455
90 10.05 905
150 10.30 1545
29.12.2019 - - - 100 10.30 1030 150 9.70 1455
90 10.05 905
50 10.30 515

Stores Ledger (FIFO Method)

Date Receipts Issues Balance Remarks

GRN. Qnty Rate Rs. SRN. Qnty. Rate Rs. Qnty. Rate Rs.
1.12.2019 300 9.70 2,910
3.12.2019 250 9.80 2,450 550 5,360
[300 [9.70 [2910
250] 9.80] 2450]
11.12.2019 - - - 400 3,890 150 9.80 1,470
[300 9.70 [2910
100] 9.80 980]
15.12.2019 300 10.05 3,015 450 4,485
[150 [9.80 [1470
300] 10.05] 3015]
20.12.2019 - - - 210 2073 240 10.05 2,412
[150 [9.80
60] 10.05
]
25.12.2019 150 10.30 1,545 - - - 390 3,957
[240 [10.05
150] 10.30]
29.12.2019 - - - 100 10.05 1005 290 2,952
[140 [10.05 [1407
150] 10.30] 1545]

Stores Ledger (Weighted Average Method)

Date Receipts Issues Balance Remarks

GRN. Qnty Rate Rs. SRN. Qnty. Rate Rs. Qnty. Rate Rs.
1.12.2019 300 9.70 2910
3.12.2019 250 9.80 2450 550 9.75 5360
11.12.2019 400 9.75 3900 150 9.73 1460
15.12.2019 300 10.05 3,015 450 9.94 4475
20.12.2019 210 9.94 2087 240 9.95 2388
25.12.2019 150 10.30 1545 - - - 390 10.08 3933
29.12.2019 100 10.08 1008 290 10.09 2925
 8. The following information is supplied by X Ltd. in respect of its raw materials for the
month of January 2020. Prepare stores ledger under FIFO, LIFO and Weighted Average
method.

Date Receipts (units) Receipts rate (Rs.) Issues (units)

1.1.2020 1000 6
10.01.2020 500 5
15.01.2020 - - 1200
20.01.2020 1000 8
30.01.2020 - - 1100

Solution:

Stores Ledger (FIFO Method)

Date Receipts Issues Balance Remarks

GRN. Qnty Rate Rs. SRN. Qnty. Rate Rs. Qnty. Rate Rs.
1.1.2020 1000 6 6000 1000 6 6000
10.01.2020 500 5 2500 1500 8500
15.01.2020 1200 7000 300 5 1500
[1000 [6
200] 5]
20.01.2020 1000 8 8000 1300 9500
30.01.2020 1100 7900 200 8 1600
[300 [5
800] 8]

Stores Ledger (Weighted Average Method)

Date Receipts Issues Balance Remarks

GRN. Qnty Rate Rs. SRN. Qnty. Rate Rs. Qnty. Rate Rs.
1.1.2020 1000 6 6000 1000 6 6000
10.01.2020 500 5 2500 1500 5.67 8500
15.01.2020 1200 5.67 6804 300 5.65 1696
20.01.2020 1000 8 8000 1300 7.46 9696
30.01.2020 1100 7.46 8206 200 7.45 1490

Q.9

From the given information, determine the value of stock to be reported in the Balance Sheet
under:

a) Item by-item basis

b) Group basis
c) Aggregate basis
Balls Historical Cost NRV
i)Blue 150000 160000
ii)Pink 300000 290000
iii)Green 450000 430000

Boxes
i)Old Box 110000 98000
ii new box 115000 116000

Gift Items 235000 210000

Solution:

a) Valuation of Inventory (Item by item):

Items Historical Cost NRV Value to be

considered
Balls:
i)Blue 150000 160000 150000
ii)Pink 300000 290000 290000
iii)Green 450000 430000 430000
Boxes:
Old Box 110000 98000 98000
New Box 115000 116000 115000

Gift Items 235000 210000 210000

Value of Stock = 1293000

B) Valuation of Stock (Group basis):

Items Historical Cost NRV Value to be

considered
Balls:
i)Blue 150000 160000
ii)Pink 300000 290000
iii)Green 450000 430000

TOTAL 900000 880000 880000

Boxes: 110000 98000

Old Box 115000 116000
New Box

TOTAL 225000 214000 214000

Gift Items 235000 210000

 TOTAL 235000 210000 210000

Valuation of stock (Aggregate Method):

Items Historical Cost NRV

Balls:
i)Blue 150,000 160,000
ii)Pink 300,000 290,000
iii)Green 450,000 430,000
Boxes:
Old Box 110,000 98,000
New Box 115,000 116,000
Gift Items 235,000 210,000
TOTA
L 13,60,000 13,04,000

Value of stock = 13,04,000