Practice Questions

Financial Accounting

Q1. Reliance Company uses a periodic inventory system. The beginning balance of inventory
and purchases made by the company during the month of April, 2020 are given below:

April 01: Beginning inventory, 5000 units @ $30 per unit.

April 18: Inventory purchased, 8000 units @ $34 per unit.

April 25: Inventory purchased, 7000 units @ $36 per unit.

Delta Company sold 1,4000 units during the month of April.

Required: Compute inventory on April 31, 2020 and cost of goods sold for the month of July
using following inventory costing methods:

1. First in, first out (FIFO) method

2. Last in, first out (LIFO) method
3. Weighted Average Method
4. Specific Identification Method

Q2. BEL Ltd. purchased a factory machine of Rs. 51,0000 on January 1, 2020. The machine
is expected to have a salvage value of Rs. 6,0000 at the end of its 5-year useful life. During
the useful life, the machine is expected to be used for 5,0000 hours. The machine was used as
under:

Year Output

1 12000

2 8000

3 11500

4 8500

5 10000

Required: Prepare Schedule of Depreciation on the basis of following methods

1. Units of Output Method

2. Straight Line Method
3. Sum of Digit Method
Q3. HUL Company uses a periodic inventory system. The beginning balance of inventory
and purchases made by the company during the month of June, 2020 are given below:

April 01: Beginning inventory, 50000 units @ $3 per unit.

April 18: Inventory purchased, 80000 units @ $4 per unit.

April 25: Inventory purchased, 70000 units @ $6 per unit.

Delta Company sold 1,40000 units during the month of April.

Required: Compute inventory on June 31, 2020 and cost of goods sold for the month of July
using following inventory costing methods:

5. First in, first out (FIFO) method

6. Last in, first out (LIFO) method
7. Weighted Average Method
8. Specific Identification Method

Q2. Tata chemical Ltd. purchased a factory machine of Rs. 51,00 on January 1, 2017. The
machine is expected to have a salvage value of Rs. 6,00 at the end of its 5-year useful life.
During the useful life, the machine is expected to be used for 5,00 hours. The machine was
used as under:

Year Output

1 120

2 80

3 115

4 85

5 100

Required: Prepare Schedule of Depreciation on the basis of following methods

4. Units of Output Method

5. Straight Line Method
6. Sum of Digit Method