Inventory Valuation Problems and Solutions

 

Inventory Valuation Problems PDF Download

 

Problem 1:

Use the following information of Fatima Malik and Co.

A company just starting business made the following four inventory purchases in June 2016:

June 1                    150 units Rs. 6.60/unit cost          Rs. 990

June 10                  200 units Rs. 6.30/unit cost                1,260

June 15                  200 units Rs. 5.85/unit cost                1,170

June 28                  150 units Rs. 5.20/unit cost                   780

                                                                                    Rs. 4,200

A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand.

 Requirement (a): Using the periodic LIFO inventory method, the value of the ending inventory on June 30 is?

 

Solution:

periodic inventory system

 

Requirement (b): Using the periodic FIFO inventory method, the amount allocated to cost of goods sold for June is?

 Solution:

periodic inventory

 

>> Read Inventory Valuation theoretical concepts and explanation.



 

Problem 2:

Adnan Naeem Imports, Ltd has the following information about the inventory of electronic components for October 2016.

problem periodic inventory

At the end of October, 220 components remained in inventory.

 

Requirement (a): If uses the FIFO method of allocating inventory, what would is the cost of goods sold for October?

 Solution:

inventory valuation under periodic inventory

 

Requirement (b): If company uses the FIFO method of allocating inventory costs, what would is the ending inventory?

 

 Solution:

periodic inventory

 

Requirement (c): If company uses the average cost method of allocating inventory costs, what would is the ending inventory for October?

Solution:

periodic inventory problem

Avg Rate = 28,450 / 900 = Rs. 31.61 per unit

>> Practice Inventory Valuation MCQs.



 

Problem 3:

Malik Company uses a periodic inventory system. The beginning inventory of a particular product, and the purchases during the current year, were as follows:

Jan.         1         Beginning inventory………………………60   units @         Rs. 105  =      Rs. 6,300

Mar.        8         Purchase……………………………………..30   units @               115  =             3,450

Aug.      11         Purchase………………………………………90   units @               125  =           11,250

Oct.       23         Purchase ……………………………………  20   units @              135  =             2,700

Total available for sale…………………………………200   units                             Rs. 23,700

At December 31, the ending inventory of this product consisted of 55 and selling price during year was Rs. 150

Using periodic costing procedures, determine:

(1) Cost of goods sold relating to this product and

(2) Cost of the year-end inventory under each (LIFO, FIFO and W. Avg.) of the flow assumptions?

 

Solution: 

LIFO and FIFO periodic inventory

w. average periodic inventoryAvg Rate = 23,700 / 200 = Rs. 118.5 per unit

periodic inventory comparative cost sheet

 

>> More reading Inventory Management.

 

Problem 4:

Prepare Store Leger Card (FIFO, LIFO and Average) and Comparative Cost Sheet from the following data.

July 01 Balance b/d …………………………………………………………50 Units ……………………………@ 10 Each

July 05 Purchases ……………………………………….…………….…..30 Units ……………………………@ 12 Each

July 09 Purchases ………………….………………………………………60 Units ……………………………@ 9   Each

July 13 Sales ………………………………………………………………..70 Units ……………………………@ 18 Each

July 23 Purchases ………………………………………………………….40 Units ……………………………@ 8 Each

July 26 Purchases ………………………………………………………….20 Units ……………………………@ 16 Each

July 30 Sales ………………………………………………………………..90 Units ……………………………@ 19 Each

 

Solution:

perpetual inventory FIFO

perpetual inventory LIFO

perpetual inventory average and comparative cost sheet

 

>> Practice Inventory Management Problems and Solutions.

 

Problem 5:

Prepare Store Ledger Card (SLC) from the following information for July.

1 ……………..Beginning Inventory ………50 Pieces   @   Rs. 20 ……………………Rs. 1,000

2 ……………..Purchases …………………100 Pieces @   Rs. 25 …………………….Rs. 2,500

9 ……………..Purchases …………………50   Pieces @   Rs. 28 …………………… Rs. 1,400

18 ……………Sales ………………………125 Pieces @   Rs. 30 ………………………Rs. 3,725

20 …………… Purchases …………………85 Pieces   @   Rs. 32 ……………………Rs. 2,720

22 ……………Purchase ……………………100 Pieces @   Rs. 34 ……………………Rs. 3,400

27 ……………Sales …………………………150 Pieces @   Rs. 29 ……………………Rs. 4,350

 

Required:  Determine the Cost of Sales, Cost of Closing Stock, Sales and Gross profit / loss under each of the following method by using perpetual inventory system, Cost are assigned on the basis of FIFO and Cost are assigned on the basis of Weighted Average

 

Solution:

FIFO perpetual inventory

weighted average and comparative cost sheet perpetual inventory

 

>> Further reading Economic Order Quantity.

 

Problem 6:

Prepare Store Ledger Card (SLC) form the following information on Jan 2017:

1. Opening Stock ………………………400 units @ Rs. 30 ………………………………………Rs. 12,000

2. Purchases ………………………………200 units @ Rs. 28 ………………………………………Rs. 5,600

15. Sales ……………………………………125 units @ Rs. 50 ………………………………………Rs. 6,250

21. Purchases ………………………………80 units @ Rs. 25 ………………………………………Rs. 2,000

27. Purchase ………………………………100 units @ Rs. 32 ………………………………………Rs. 3,200

29. Sales ……………………………………175 units @ Rs. 48 ………………………………………Rs. 8,400

30. Sales ……………………………………140 units @ Rs. 55 ………………………………………Rs. 7,700

 

Required

Determine the Cost of Sales, cost of Closing Stock and Gross profit under each of the following method by using perpetual inventory system.

1. Cost are assigned on the basis of LIFO

2. Cost are assigned on the basis of Weighted Average

 

Solution:

LIFO perpetual inventory

weighted average perpetual inventory

comparative cost sheet perpetual inventory

 

>> Related Problems are Economic Order Quantity Problems and Solutions.