Tutorial 9 ACC_ACF1100 S2 2018 - ACC 1100 Introduction to Financial Accounting Semester 1 2018 Custom text(Carlon et al questions And Additional

Tutorial 9 ACC_ACF1100 S2 2018 - ACC 1100 Introduction...

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ACC 1100: Introduction to Financial Accounting Semester 1 2018 Custom text (Carlon et al) questions And Additional tutorial problems Solutions Tutorial 9: Recording Inventory References: Text: Carlon et al Chapter 5 Work Requirements : Chapter 5 BE5.3(a) Ex5.8 PSA5.3 (not LIFO) Additional Problems 14, 15, 16 and 17 Copyright © Monash University 2018
BRIEF EXERCISE 5.3 (a) The ending inventory under FIFO consists of 400 units at $18 for a total allocation of $7,200. EXERCISE 5.8 (a) Fashionista Hair Accessories Pty Ltd Inventory Categories Cost NRV LCNRV Silk ribbons $25,200 $21,420 $21,420 Gold-plated hair clips 18,900 19,950 18,900 Crystal hair jewels 29,400 26,880 26,880 Total valuation $73,500 $68,250 $67,200 The lower of cost and net realisable value is. $67,200 (b) It is important to account for inventory using the LCNRV basis as this is required by AASB102. No asset should be valued at an amount greater than the economic benefits expected to be received from that asset. PROBLEM SET A 5.3 Modelmania Ltd (a) Cost of Goods available for Sale Date Explanation Units Unit Cost Total Cost March 1 Beginning inventory 90 $35 $3,150 5 Purchase 210 40 8,400 13 Purchase 330 45 14,850 21 Purchase 240 50 12,000 26 Purchase 90 55 4,950 Total 960 $43,350 Copyright © Monash University 2018
(b) FIFO (1) Ending Inventory Date Units Unit Cost Total Cost March 26 90 $55 $4,950 21 60 50 3,000 *150 $7,950 *960 – 810 (2) Cost of sales Cost of goods available for sale $43,350 Less: Ending inventory (7,950) Cost of sales $35,400 Proof of Cost of sales Date Units Unit Cost Total Cost March 1 90 $35 $3,150 5 210 40 8,400 13 330 45 14,850 21 180 50 9,000 810 35,400 WEIGHTED AVERAGE COST (1) Ending Inventory Total Cost of Inventory/Total No. of units = $43,350 ÷ 960 = $45.16 Units Unit Cost Total Cost 150 $45.15 $6,774 (2) Cost of sales Cost of goods available for sale $43,350 Less: Ending inventory (6,774) Cost of sales $36,576 Copyright © Monash University 2018
Additional Problem 14 (a) Explain the components of the cost of inventory according to AASB102(b) Briefly distinguish between the following costing methodsIdentified Cost, Weighted Average, FIFO, LIFO(c) If prices are rising what method of costing will result in the highest closing inventory(d) Explain net realizable value according to the accounting standardInclude two examples of costs to make the sale(e) Explain the lower of cost and net realizable value rule according to the accounting standard(f) Briefly explain what factors may lead to the Net Realizable value falling below the cost ofinventory Solution

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