fal Chapter 4 Inventories Question 1: From the following information, ascertain the value of Closing Stock as on 3ist March,2023. Particulars @) Opening Stock 1,47,500 Cash Sales 5,50,000 Credit Sales 4,00,000 Purchases 8,85,000 Manufacturing Expenses 1,35,000 Advertisement Expenses 43,000 Rate of Gross Profit on Cost 25% At the time of valuing inventory as.on 3ist March,2022, a sum of 712,500 was written off on a particular item, which was originally purchased for ¥ 50,000 and was sold during the year for 7 40,000. (Dec’'2023) Solution: Statement of Valuation of Stock as on 3ist March, 2023 Particulars z Value of stock as on Ist April, 2022 1,47,500 ‘Add: Purchases during the period from 1.4.2022 to 31.3.2023| 8,85,000 ‘Add: Manufacturing expenses during the above period 135,000 71,67,500 Less: Cost of sales during the peri Sales 950,000 Less: Gross profit (Working Note) 184,500 7,65,500 Value of stock as on 313.2023 4,02,000 Working Note: Particulars z Calculation of gross profit: Gross profit on normal sales 20/100 x (9,50,000 -40,000) 182,000 Gross profit on the particular (abnormal) item 40,000 - (50,000 - 12,500) 2,500 184,500 Alternative: Statement showing the valuation of inventory as on 3lst March, 2023, Particulars z z Inventory in the beginning 147,500 Less: Book value of Abnormal Inventory (50,000-12,500) 37,500 110,000 Add: Purchases 8,85,000 Manufacturing Expenses 135,000Less: Cost of goods sold: 1,30,000 Sales as per books (5,50,000 + 4,00,000) 950,000 Less: Sales of abnormal item 40,000 9,10,000 Less: Gross Profit @20% 1,82,000| _7,28,000 Inventory in trade as on 3ist March 2023 4,02,000 Note: The value of closing stock on 31st March, 2023 may, alternatively, be found out by preparing Trading Account for the year ended 31st March, 2023. Question 2 The Profit and Loss account of Ram showed a net profit of % 5,75,000 after considering the closing stock of 2 2,55,000 on 3ist March 2022. Subsequently the following information was obtained from scrutiny of the books. (i) Purchases for the year included 2 10,500 paid for electrical fittings of the shop. (ii) Ram gave goods worth of 2 25,000 as free samples for which no entry was made. (iii) Invoices for goods amounting to 2 185,000 have been entered on 29th March 2022 but were not included in the stock. {iv) Sales amounting to 2,05,000 were dispatched on 27th March but were includedin sales of April, 2022. (v)_ Goods costing % 55,000 were sent on sale of return basis in March, 2022 at a margin of profit of 33% % on cost. Approval was given in April, 2022 but these were considered as sales in March, 2022, Calculate. the value of stock as on 3ist March, 2022 and the adjusted net profit for the year ended on that date. (Jun'2023) Solution: Profitand Loss Adjustment Account Particulars z Particulars z To Advertisement (samples) 25,000 | By Net profit 5,75,000 To Sales (goods approved in 73,333 | By Electric fittings 10,500 April to be taken as April sales: (55,000 + 18,333) To Adjusted net profit 9,57,167 | By Samples 25,000 By Stock (purchases of 185,000 March not included in stock) By Sales (goods sold in 2,05,000 March wrongly taken as April sales) By Stock (goods sent on 55,000 70,55,500 _| approval basis notincluded| —_10,55,500 in stock) Calculation of value of inventory on 3ist March, 2022 Particulars: z Stock on 3ist March, 2022 (given) 2,55,000 ‘Add: Purchases of March, 2022 not included in the stock 185,000 Goods lying with customers on approval basis 55,000 Value of inventory as on 31.03.2022 4,95,000Note: igures are rounded off to the nearest Rupee. Question 3: Zed Enterprises furnishes the following information for the year ended 3ist March,2021. Particulars Amount (2) Value of Stock as on Ist April,2020 28,00,000 Purchases during the year 1,38,40,000 Manufacturing Expenses during the year 28,00,000 Sales during the year 2,08,80,000 The following further information is also provided: (i) At the time of valuing stock on 3ist March,2020 a sum of % 2,40,000 was written off for a particular item which was originally purchased for % 8,00,000. This item was sold during the year ended 31st March,2021 for 2 6,40,000. (ii) Except forthe above transaction, the rate of gross profit during the year was 1/3rd on cost. Ascertain the value of Stock as on 31st March,2021. (Jun’2022) Solution: Statement of Valuation of Stock as on 3ist March; 2021 Particulars z z Value of stock as on Ist April, 2020 28,00,000 ‘Add: Purchases during'the year 1,38,40,000 Add: Manufacturing expenses during the above period 28,00,000 1,94,40,000 Less: Cost of sales during the period: Sales 2,08,80,000 Less: Gross profit 5140,000| __1,57,40,000 Value of stock as on 313.2021 37,00,000 Working Note: Particulars z Calculation of gross profit: Gross profit on normal sales 25/100 x (2,08,80,000 -6,40,000) 50,60,000 Gross profit on the particular (abnormal) item 6,40,000 - (8,00,000- 80,000 2,40,000) 51,40,000 The value of closing stock on 3ist March, 2021 may, alternatively, be found out by preparing Trading Account for the year ended 3ist March, 2021. Alternatively the solution can be presented in the following manner: Dr Trading account for the year ended 31st March, 2021_Cr Particulars: Normal [Abnormal] Total [Particulars _Normal [Abnormal | Total To Opening 22,40,000 | 5,60,000 | 28,00,000 |By Sales _|2,02,40,000] 6,40,000 |2,08,80,000 Stock 3,8,40,000] 0 — |1,38,40,000 |By Closing] 37,00,000 | 0 —_ | 37,00,000 To Purchases | 28,00,000 | 0 | 28,00,000 | Stock To Manufacturing! 50,60,000 | 80,000 | 51,40,000 Expenses [To Gross Profit, (Working Note)* Total [2,39,40,000 | 6,40,000 |2,45,80,000 2,39,40,000 | 6,40,000 |2,45,60,000Question 4: The following are the details of the spare parts of an Oil Mill: 2021 Opening Inventory Nil 2021, Purchases 10 units @ 2 300 per unit 15-1-2021 Issued for consumption Sunits 1-2-2021 Purchases 20 units @ 2 400 per unit 1-2-2021 Issued for consumption 10 units 20-2-2021 Issued for consumption 10 units Find out the value of Inventory as on 313.2021, if the company follows Weighted Average Method. (Dec’2021) Solution: Oil Mill Calculation of the value of Inventory as on 31-3-2021 Receipts Issues Balance Date Units | Rate [Amount | Units] Rate [Amount| Units | Rate [Amount z z z z z z 142021 _| Balance 312021 10 _.|7'300" | 3,000 70 3,000 15-1-2021 5 | 300 | asoo| 5. 1500 4-2-2021 20 | 4005] 8000 25 | 380 | 9,500 15-2-2021 yo [7380 | 3800] 15 | 380 | 5,700 20-2-2021 10 | 380 [38005 [| 380 | 1900 Therefore, the value of Inventory as on 3-3-2021 = 5 units @ 2380 = 1,900 Question 5 M/s Dheeraj, Profit and loss account showed a net profit of % 8,00,000, after considering the closing stock of 2 7,50,000 on 3ist March, 2024. Subsequently the following information was obtained from scrutiny of the books: (i) Purchases for the year included 2 30,000 paid for new electric fittings for the shop. (ii) M/s Dheeraj gave away goods valued at 2 80,000 as free samples for which no entry was made in the books of accounts. (iii) Invoices for goods amounting to 2 5,00,000 have been enteredon 27th March, 2024, but the goods were not included in stock. (iv) In March, 2024 goods of % 4,00,000 sold and delivered were taken in the sales for April, 2024. (v) Goods costing 2 150,000 were sent on sale or return in March, 2024 at a margin of profit ‘0f 33-13% on cost. Though approval was given in April, 2024 these were taken as sales for March, 2024. You are required to determine the adjusted net profit for the year ended on 313.2024 and calculate the value of stock on 3ist March, 2024. (MTP Sep'2024) Solution: Profit and Loss Adjustment A/c Particulars z Particulars z To Advertisement 80,000 | By Net profit '8,00,000(samples) To Sales 2,00,000 | By Electric fittings 30,000 (goods approved in April to By Samples 80,000 be taken as April sales) To Adjusted net profit 16,80,000 | By Stock (Purchases of March 5,00,000 not included in stock) By Sales (goods sold in March 4,00,000 wrongly taken as April sales) By Stock (goods sent on 150,000 approval basis not included in stock) 19,60,000 19,60,000 Calculation of value of inventory on 31st March, 2024 Particulars z Stock on 3st March, 2024 (given) 7,50,000 Add: Purchases of March, 2024 not included in the stock 5,00,000 Goods lying with customers on approval basis. 150,000 14,00.000 Question 6: Ram Setu Ltd. keeps nostock records but a physical inventory of stock is made at the end of each quarterand the valuation is taken/at cost. The company’s year ends on 3ist March, 2024 and their accounts have been prepared to that date. The stock valuation taken on 3ist March, 2024 was however, misleading and you have been advised to value the closing ‘stocks as on 31st March, 2024 with the stock figure as on 31st December, 2023 and some other information is available to you: (i) Thecostof stock on 3ist December, 2023s showniby the inventory sheet was 27,20,000. (ii) On 3ist December, stock sheet showed the following discrepancies: (a) “Apage total of % 45,000 had been carried to summary sheet as 3 54,000. (b) The total of a page had been undercast by 71,800. (ii Invoice of purchases entered in the Purchase Book during the quarter from January to March, 2024 totalled 2 6,30,000. Out of this 2 27,000 related to goods received prior to 3ist December,2023. invoices enteredin April, 2024 relating to goods received inMarch, 2024 totalled % 36,000. (iv) Sales invoiced to customers totalled 2 8,10,000 from January to March, 2024, Of this 7 45,000 related to goods dispatched before 3ist December, 2023. Goods dispatched to customers before 31st March, 2024 but invoiced in April, 2024 totalled 2 36,000. (v)_ During the final quarter, credit notes at invoiced value of 2 9,000 had been issued to ‘customers in respect of goods returned during that period. The gross margin earned by the company is 25% of cost. You are required to prepare a statement showing the amount of stock at cost as on 3ist March, 2024. (MTP Jun'2024) Solution: Valuation of Physical Stock as at March 31, 2024. Particulars z Stock at cost on 3F* March,2023 °7,20,000 Add: (1) Under casting of a page total 1800 (2) Goods purchased and delivered during January - March, 20242 (6,30,000 - 27,000 + 36,000) 6,39,000 (3) Cost of sales return 2 (9,000~ 1,800) —2200| — _6,48,000] 13,68,000 Less: (1) Overcasting of a page total 7 (54,000 - 45,000) 9,000 (2)Goods sold and dispatched during January - March, 2024 (8,10,000 ~ 45,000 + 36,000)8,07,000 Less: Profit margin 8,01,000 * 25/125 1,60,200 640,800] —_(6,49,800) Value of stock as on 3ist March, 2024 7,18,200 Note: In the above solution, transfer of ownership is assumed to take place at the time of delivery of goods. If it is assumed that transfer of ownership takes place on the date of invoice, then 2 36,000 goods delivered in March 2024 for which invoice was received in April, 2024, would be treated as purchases of the accounting year 2023-2024 and thus excluded. Similarly, goods dispatched in March, 2024 but invoiced in April, 2024 would be excluded and treated as sale of the year 2023- 2024 Question 7: M/s Manas, Profit and loss account showed a net profit of 7 32,00,000, after considering the closing stock of 7 30,00,000 on 3ist March, 2024. Subsequently the following information was obtained from scrutiny of the books: Purchases for the year included 1,20,000 paid for new electric fittings for the shop. M/s Manas gave away goods valued at 2 3,20,000 as free samples for which no entry was made in the books of accounts: Invoices for goods amounting to 2 20,00,000 have been entered on 25th March, 2024, but the goods were not included in stock. In March, 2024 goods of % 16,00,000 sold and delivered were taken in the sales for April, 2024. || Goods costing % 6,00,000 were sent on sale or returnin March, 2024 at a margin of profit, of 33-1/3% on cost. Though approval was given in April, 2024 these were taken as sales for March,2024. You are required to determine the’adjusted net profit for the year ended on 313.2024 and calculate the value of stock on 3ist March, 2024. (MTP May2024) Solution: Profit and Loss Adjustment A/c Particulars. z Particulars: z To Advertisement (samples] 3,20,000 | By Net profit 32,00,000 To Sales 8,00,000 | By Electric fittings 120,000 (goods approved in April By Samples. 3,20,000 to be taken as April sales) By Stock 20,00,000 (Purchases of March To Adjusted net profit 67,20,000| not included in stock) By Sales (goods sold in 16,00,000 March wrongly taken as April sales) By Stock (goods sent on 600,000 approval basis not included in stock) 78,40,000 '78,40,000Calculation of value of inventory on 3ist March, 2024 Particulars z Stock on 3ist March, 2024 (given) 30,00,000 Add: Purchases of March, 2024 not included in the stock 20,00,000 Goods lying with customers on approval basis 6,00,000 16,00,000 Question 8: The following are the details of the spare parts of a Printing Press: Opening Inventory Nil Purchases 100 units @ 2 300 per unit 151-2023 __ Issued for consumption 50 units -2023 Purchases 200 units @ % 400 per unit 15-2-2023 _ Issued for consumption 100 units 20-2-2023 _ Issued for consumption 100 units Find out the value of Inventory as on 31.3.2023, if the company follows Weighted Average Method. (MTP Dec2023) Solution: Printing Press Calculation of the\value of Inventory as on 31-3-2023 Receipts Issues Balance Date Units Rate [Amount | Units | Rate [Amount] Units | Rate [Amount! z z z z z z 11-2023 Balance: Nil 11-2023 j00| 300] \ 30,000) joo] 300] 30,000) 5-1-2023 50| — 300| 15,000| 50/300] _ 15,000] 1-2-2023. 200| 400] 80,000! 250| _380| 95,000] 5-2-2023 100| 380] 38,000] 150|__380|_ 57,000] 20-2-2023 too] 380| 38,000! _50/__ 380] _ 19,000] Therefore, the value of Inventory as on 31-3-2023 = 50 units @ 2380 = 219,000 Question 9: Physical verification of stock in a business was done on 23 rd April, 2023. The value of the stock was 2 48,00,000. The following transactions took place between 23rd Aprilto 30th April, 2023: (i) Out of the goods sent on consignment, goods at cost worth 2 2,40,000 were unsold. (ii) Purchases of 2 4,00,000 were made out of which goods worth 3 1,60,000 were delivered ‘on Sth May, 2023. (iii) Sales were % 13,60,000, which include goods worth 2 3,20,000 sent on approval. Half of these goods were returned before 30th May, 2023, but no information is available regarding the remaining goods. (iv) Goods are sold at cost plus 25%. However goods costing % 2,40,000 had been sold for 2 120,000. You are required to determine the value of stock on 30th April, 2023 (MTP Nov2023) Solution: Statement of Valuation of Stock on 30th April,2023 Particulars 2 Value of stock as on 23rd April, 2023 48,00,000 Add: Unsold stock out of the goods sent on consignment 240,000 Purchases during the period from 23rd April, 2023 to 30th_| 2,40,000April, 2023 Goods in transit on 30th April, 2023 160,000 Cost of goods sent on approval basis (80% of 2 1,60,000) 128,000 ‘268,000 55,68,000 Less: Cost of sales during the period from 23rd April, 2023 to 30th April,2023 Sales (2 13,60,000-2 1,60,000) 12,00,000 Less: Gross profit -26,000 11,04,000 Value of stock as on 30th April, 2023 64,000 Working Notes: z z 1. | Calculation of normal sales: Actual sales 13,60,000 Less: Abnormal sales Return of goods sent on approval 2,80,000 19,80,000 2. | Calculation of gross profit: Gross profit or normal sales 20/100 x 3 10,80,000 216,000 Less: Loss on sale of particular (abnormal) goods (240,000 120,000) 120,000 Gross profit 96,000 Question 10: From the following particulars ascertain the value of inventories as on 31* March, 2024: Inventory as.on Ist April, 2023 %3,50,000 Purchase made during the year 12,00,000 Sales 2 18,50,000 Manufacturing Expenses 2 1,00,000 Selling and Distribution Expenses 250,000 Administration Expenses 80,000 At the time of valuing inventory as on 3ist March, 2023, a sum of % 20,000 was written off on a particular item which was originally purchased for % 55,000 and was sold during the year for 7 50,000. Except the above mentioned transaction, gross profit earned during the year was 20 % on sales. (RTP Sep'2024) Solution: Statement of Inventory in trade as on 3ist March, 2024 z Inventory as on 3ist March, 2023, 3,50,000 Less: Book value of abnormal inventory (3 55,000 - 20,000) 35,000 Add: Purchases Manufacturing Expenses 16,15,000 Less: Cost of goods sold: Sales as per books 18,50,000 Less: Sales of abnormal item 50,000 18,00,000Less: Gross Profit @ 20% 360,000 14,40,000 Inventory in trade as on 31st March, 2024 175,000 Question Ti: trader prepared his accounts on31st March, each year. Due to some unavoidable reasons, no stock taking could be possible till 15 April, 2023 on which date the total cost of goods in his godown came to 2 50,000. The following facts were established between 3ist March and 15" April, 2023. Sales 7 41,000 (including cash sales 2 10,000) Purchases 2 5,034 (including cash purchases 2 1,990) Sales Return 3 1,000. On 18th March, goods of the sale value of 2 10,000 were sent on sale or return basis to a customer, the period of approval being four weeks. He returned 40% of the goods on 10th April, approving the rest; the customer was billed on 16th April. (v) The trader had also received goods costing 2 8,000 in March, for sale on consignment basis; 20% of the goods had been sold by 3ist March, and another 50% by the 15th April. These sales are not included in above sales. Goods are sold by the trader at a profit of 20% on sales. You are required to ascertain the value of Inventory as on 3* March, 2023. (RTP Jun'2024) Solution: Statement of Valuation’of Stock on 3F March, 2023 Particulars z z Value of stock as on 15th April, 2023, 50,000 ‘Add: | Cost of sales during the period from 3f* March, 2023 to 15th April, 2023 Sales (2 41,000=2 1,000) 40,000 Less: Gross Profit (20% of % 40,000) £8,000 32,000 Cost of goods sent on approval basis (80% of 2 6,000) 4,800 86,800 Less:| Purchases duringthe periodfrom 31st March, 2023 to 1Sth| 5,034 April, 2023 Unsold stock out of goods received on consignment basis 2,400 7,434 (30% of 28,000) 79.366 Question 12: Stock taking of ABC Stores for the year ended 3st March, 2023 was completed by 10th April, 2023, the valuation of which showed a stock figure of % 3,35,000 at cost as on the completion date. After the end of the accounting year and till the date of completion of stock taking, sales for the next year were made for 2 13,750, profit margin being 33.33 percent on cost. Purchases for the next year included in the stock amounted to 18,000 at cost less trade discount 10 percent. During this period, goods were added to stock of the mark-up price of 7 600 in respect of sales returns. After stock taking it was found that there were certain very old ‘slow moving items costing 2 2,250 which should be taken at 2 1,050 to ensure disposal to an interested customer. Due to heavy floods, certain goods costing 2 3,100 were received from the supplier beyond the delivery date of customer. As a result, the customer refused to take delivery and net realizable value of the goods was estimated to be % 2,500 on 3st March, 2023. You are required to calculate the value of stock for inclusion in the final accounts for the year ended 3ist March, 2023. Closing stock is valued by ABC Stores on generally accepted accounting principles.(RTP Dec2023) Solution: Statement showing the valuation of stock as on 3ist March, 2023 Particulars z A _| Value of Stock as on 10th April, 2023 3,35,000 B | Add: Cost of sales after 3ist March, till stock taking (2 10,312 13,750 - 2 3,438) C | Less: Purchases for the next period (net) 16,200 D | Less: Cost of Sales Returns 450 E | Less: Loss on revaluation of slow moving inventories 1200 F | Less: Reduction in value on account of default 600 G_| Value of Stock on 3ist March, 2023. 326,862 Note: Profit margin of 33.33 percent on cost means 25 percent on sale price. Question 1&: Raj Ltd. prepared their accounts financial year ended on 3ist March 2022. Due to unavoidable circumstances actual stock has been taken on 10th April 2022, when it was ascertained at % 5,00,000. It has been found that; (i) Sales are entered in the Sales Book on the day of dispatch and return inwards in the Returns Inward Book on the day of the goods received back. (ii) Purchases are entered in the Purchase Book on the day the Invoices are received. (iii) Sales between Ist April 2022 to 9th April 2022 amounting to % 80,000 as per Sales Day Book. (iv) Free samples for business promotion issued during Ist April 2022 to 9th April 2022 amounting to 2 16,000 at cost. (v) Purchases during Ist April 2022 to 9th April 2022 amounting to’ 40,000 but goods amounts to 2 8,000 not received till the date of stock taking. (vi) Invoices for goods purchased amounting to 2 80,000 were entered on 28th March 2022 but the goods were not included in stock. Rate of Gross Profit is 25% on cost. Ascertain the value of Stock as on 3lst March, 2022. (RTP Jun’2023) Solution: Statement of Valuation of Physical Stock as on 3ist March,2022 Particulars z z Value of stock as on 10th April, 2022 '5,00,000 ‘Add: Cost of sales during the intervening period Sales made between 1.4.2022 and 9.4.2022 80,000 Less: Gross profit @20% on sales £16,000) 64,000 Free sample —16,000 5,80,000 Less: Purchases actually received during the intervening period: Purchases from 1.4.2022 to 9.4.2022 40,000 Less: Goods not received upto 9.4.2022 {8,000) £32,000) 5,48,000 ‘Add: Purchases during March, 2022 but not recorded in stock] 80,000 Value of physical stock as on 31.3.2022 628,000 Question 14: A trader prepared his accounts on 3ist March, each year. Due tosome unavoidable reasons, no stock taking could be possible till sth April,2022 on which date the total cost ofgoods in his godown came to % 2,50,000. The following facts were established between 3ist March and 15th April,2022. (i) Sales 2 2,05,000 (including cash sales 2 50,000) (ii) Purchases 2 25,170 (including cash purchases 3 9,950) (iii) Sales Return 2 5,000 (iv) On 1Sth March, goods of the sale value of 2 50,000 were sent on sale or return basis to a customer, the period of approval being four weeks. He returned 40% of the goods on 10th April, approving the rest; the customer was billed on 16th April. (v)_ The trader had also received goods costing 7 40,000 in March, for sale on consignment basis; 20% of the goods had been sold by 3ist March, and another 50% by the 15th April. These sales are not included in above sales. Goods are sold by the trader at a profit of 20% on sales. You are required to ascertain the value of Inventory as on 3ist March, 2022. (RTP Dec’2022) Solutio Statement of Valuation of Stock on 31st March, 2022 Particulars z z Value of stock as on 15th April, 2022 2,50,000 ‘Add: | Cost of sales during the period from Sist March,2022 to 1Sth| April, 2022 Sales (3 2,05,000-5,000) 2,00,000 Less: Gross Profit (20% of 2 2,00,000) 40,000 1,60,000 Cost of goods sent on approval basis (80% of % 30,000) 24,000 434,000 Less: | Purchases during the period from 3ist March,2022 to 15th April, 2022 (25,170 Unsold stock out of goods received on consignment basis| (30% of % 40,000) ‘12,000 37,170 Value of Inventory as on 31st March, 2022 3,96,830