5. (a)
Oriental Camera Shop use the lower cost of market basis for its inventory. The
following data are available at December
31’09:-
Item Units Unit Cost Market Price
Taka Taka
Cameras:
Minolta 5 170 160
Canon 6 150 152
Light meters:
Vivitar 12 125 110
Kodak 11 115 135
Requirements:
Determine the amount of the ending
inventory by applying the lower of cost or market basis to-
(i) individual items;
(ii) inventory categories;
(iii) the total inventory.
Answer:
(i) Ending
inventory of individual items: lower of cost or market price.
Cameras:
Minolta…..5xTk.160=Tk.
800
Canon……6xTk.150=Tk.900
Tk.1700
Light
meters:
Vivitar……12xTk.110=Tk.
1320
Kodak……11xTk.115= Tk.1265
Tk.2585
(ii) Ending inventory of categories: lower of cost
or market price.
Cameras:
Cost Market Inventory value
of Cameras
Minolta…..5xTk.170=Tk.
850
5x160=800 Tk. 1712
Canon……6xTk.150=Tk.900 6x152=912
Tk.1750 Tk. 1712
Light
meters:
Vivitar……12xTk.110=Tk.
1320 12x110=Tk.1320 Light meters:
Kodak……11xTk.115= Tk.1265 11x135=Tk.1485 Tk.2765
Tk.2585 Tk. 2805
(iii)
Total Ending Inventory:
Cost Market Total Ending
Inventory
Cameras:……….Tk.
1750 Tk.1712
Light meters:……Tk. 2765 Tk.2805 4515
Tk.4515 Tk.4517
5(b)’X’
Co. ltd purchased a machinery Tk. 5,10,000 on January 1,2001.
Useful
life is 5 years, scrap value Tk. 10,000.
During 2001, working hours were 2000. Total estimated working hours
25,000.
Requirements:
Compute
depreciation for 2001 under each of the following methods:
(i) Straight
line;
(ii)
Working hours;
(iii)
Sum of years digit.
Answer: Machine Value-start
Value
(i) Straight line=
Per
year
= 510000-10000 5,00,000
50000 50,000
1st Year Depreciation=10,000
2nd Year Depreciation=10,000
3rd Year Depreciation=10,000
4th Year Depreciation=10,000
5th
Year Depreciation=10,000
(ii) 510000-10000
Working
hours=
25000
=Tk.
20 per hrs
Depreciation for 2001= 2000Hrs x Tk.20=40000 Tk.
Depreciation
value
Sum of years digit= x Maximum years
Total sum of
years
Given
That,
Total
economic life or sum of years=1+2+3+4+5=15
Maximum
value=Tk. 5,10,000
Economic
life=5 years
Depreciation value=5,10,000-10,000=5,00,000
Depreciation for 2001,
5,00,000
1st
Year Depreciation=
x5=Tk.1,66,667 Ans.
15
5,00,000
2nd
Year Depreciation=
x4=1,33,333 Tk.
15
5,00,000
3rd Year Depreciation= x3=1,00,000
15
5,00,000
4th Year Depreciation= x2=66,000
15
5,00,000
5th
Year Depreciation= x1=33,000
15
May, 2007 Q.7
Tava company have a begining inventory
inventory of 400 units of product X at a cost 8 per unit.During the year they
purchase are-
Purchase of product X are:
February, 20: 200 units at the rate of Tk.9
May, 5: 500 units at the rate of Tk. 10
August, 12 : 300 units at the rate of Tk.11
December, 8: 100 units at the rate of Tk. 12
Tava Company uses a periodic inventory
system. Sales total 12000 units Tk. 16 each.
Requirements are:-
i) Determine the cost of goods
available for sale
ii) Determine the ending Inventory both
LIFO and FIFO method
iii) Prepare income statement both the
system
(i) Opening inventory of product X=400
units x Tk.8
=Tk. 3200
Purchase of product X are:
February, 20: 200 units x 9 Tk. =Tk.1800
May, 5: 500 units x 10 Tk. =Tk.5000
August, 12 : 300 units x 11 Tk.=Tk.3300
December, 8: 100 units x 12 Tk.= Tk.1200
December,
18: 200 units x 18 =Tk. 3600
Total 1300
units =Tk.14100
So, cost of goods available for sale
(1300 units+ 400 units)=1700 units
Tk(14100+3200)= Tk. 17300
(ii) Ending Inventory: Under FIFO Method
Goods available for sale =1700 units
Goods
sold during the year=1200
So ending inventory=500 units
Cost of Ending Inventory after FIFO
December 18 , 200 units x 14 Tk.=
2800Tk.
December 8 , 100 units x 12 Tk.= 1200Tk.
December
12 , 200 units x 11 Tk.= 2200Tk.
=6200
Cost of Ending Inventory under FIFO
Opening Inventory-400 x 8=3200
Feb, 20: 200 x 9=1800
May, 5: 500 x 10=5000
August,
12 100 x 11=1100
=11100
Cost of Ending Inventory under LIFO
December, 28: 200 x 14 =2800
December, 8:
100 x 12 =1200
August, 12 : 300 x 11=3300
May, 5: 500 x 10=5000
February,
20: 100 x 9=900
=Tk.13200
(iii) Income Statement:
FIFO: for the year ended 31, December
Sales during the year 1200 x 16=19200
Less: cost of goods sold =11100
Gross
profit=8100
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