Valuation of inventories doubt on as 2

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PLEASE PROVIDE WORKING NOTES ON:

Y LTD PURCHASED 500 UNITS OF RAW MATERIALS @ RS. 150 PER UNIT GROSS LESS 10% TRADE DISCOUNT SALES TAX IS CHARGEABLE @ 5% ON THE NET PRICE.

THE EXCISE DUTY ELEMENT ON PRODUCT IS RS.12 PER UNIT AGAINST WHICH MODVAT CAN BE CLAIMED.

THE COMPANY SPENT RS.1000 ON TRANSPORTATION AND RS 500 FOR LOADING AND UNLOADING.

CALCULATE THE COST OF PURCHASE OF RAW MATERIAL.

ANSWER IS RS.72,375.

CAN ANYBODY SAY HOW THIS ANSWER IS ARRIVED..

Replies (3)

Tehsinkhan Pathan

CA CMA DISA(ICAI) B.COM

3230 Points Posted on 30 July 2012

Purchase price		150
less : discount 10		-15
Net Purchase Price		135

Purchase Cost		67500
(500 * 135)
Add :- Excise		6000
(500 * 12)
TOTAL		73500
Add :- Sales Tax @ 5%		3675
Net Purchase Cost		77175
Add :- Direct Expenses		1500
(1000+500)
TOTAL		78675
Less :- Excise		6000
Purchase Cost (AS-2)		72675

For calculation of Sales tax , you need to add excise first, calculate total purchase cost then deduct amount of excise already added since MODVAT for the same is available...now this resultant figure wil be your purchase cost as per AS - 2

Vamshi Vuppala

22 Points Posted on 03 November 2019

ls this right ?

Paul Francis

22 Points Posted on 11 November 2019

Yes Vamshi Vuppala, your answer is correct. The solution above is wrong. Excise comes into picture only in production or manufacture. This is purchase.