Inventory problem

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RishebhKumar

Studying

128 Points Posted on 22 May 2012

Invertory Problem

Q1. C Ltd. Recorded the following information as on March 31,2005.

Stock as on April01,2004------------------80000

Purchases------------------------------------160000

Sales ------------------------------------------200000

It is noticed that goods worth Rs.30000 were destroyed due to fire. Against this, the insurance company accepted the claim of Rs.20000

The company sells goods at cost plus 33.33%.The value of closing inventory, after taking into account the above transaction is

Ans. Opening + Purchases – Closing stock = cost of goods sold

80000 + 160000 –closing stock =

I couldn't solve it further and don't know the adjustment of loss by fire and insurance claim

Plz solve and explain it

Thank you

Replies (3)

T.S.Vignesh

Audit Manager

76 Points Posted on 22 May 2012

Opening + Purchases – Closing stock = cost of goods sold

Closing Stock = opg.+purch-cogs

clg.stock = 80000+160000-[loss due to fire+150000] (200000*100/133.33)

=80,000+1,60,000-[10,000+1,50,000]

=Rs.80,000

Tejaswi Kasturi

student-cpt

427 Points Posted on 23 May 2012

the cost of goods sold = 2,00,000*100/133.33 = 1,50,000

closing stock is 80,000 + 1,60,000 - 1,50,000 - 30,000 (goods lost through fire) = 60,000

The mistake in the above answer is he netted the goods lost in fire with insurance claim the correct treatment is to subtract the goods lost in fire from closing stock. now the goods lost in fire are credited to trading A/c i.e. 30,000 to trading a/c and debit 10,000 as loss through fire to profit/loss a/c