07-20-2016, 08:51 AM
MGT101 Financial Accounting GDB Solution
Graded Discussion Board (GDB) of Financial Accounting MGT101 semester spring 2016
Topic to be tested: 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
Solution:
1.
FIFO: Closing inventory : 03 x 120 = 360
LIFO: Closing Inventory: 03 x 100 = 300
2.
LIFO method is not recommended by IAS.
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:
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:
- 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?
- FIFO
- LIFO
- FIFO
- Which method of inventory valuation is NOT recommended by International Accounting Standards (IAS) for presenting the value of inventory in financial statements?
- 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.