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MGT101 Financial Accounting GDB Solution

Graded Discussion Board (GDB) of Financial Accounting MGT101 semester spring 2016

Topic to be tested:

• Methods of Inventory Valuation
  

 

Learning Objectives:

• To develop an understanding about FIFO and LIFO methods of inventory valuation.
  
  
• To understand the practical implication of inventory valuation and its impact on financial statements.
  

 

Discussion Question:

 

ABC Enterprise presents the following information relating to operations:

                            

Inventories – opening  
10 Units @ Rs. 100 per Unit
Purchases on July 12, 2016
05 Units @ Rs. 120 per Unit
Sales on July 15, 2016           
12 Units @ Rs. 150 per Unit

 

 

Required:

 

1. What would be the cost of closing inventory as on July 16, 2016 to be reported in balance sheet by using following methods of inventory valuation?
   
   
   1. FIFO
      
   2. LIFO
      
2. Which method of inventory valuation is NOT recommended by International Accounting Standards (IAS) for presenting the value of inventory in financial statements?
   
3. Give valid arguments in favor of method NOT recommended by IAS for presenting the value of inventory in balance sheet.
   

Solution:

1.
 FIFO: Closing inventory : 03 x 120 = 360
LIFO: Closing Inventory: 03 x 100 = 300

2.
LIFO method is not recommended by IAS.

[Joosh]

yaar yeah complete soluation hay kaya ?

[Admin]

yaar yeah complete soluation hay kaya ?

Yes. No. 3 should be done by yourself as copying it would mean zero marks for everyone.