Lower of Cost And Net Realisable Value

⭳ 64 Download 📄 3 Pages / 734 Words

The information below relates to barrels of oil held in the inventory of Olsen’s Ltd during 2015.

Barrels

Unit cost

1 January

15 April

13 May

9 August

28 October

Beginning inventory

Purchases

Sales ($52 per barrel)

Purchases

Sales ($52 per barrel)

30 000

40 000

(50 000)

35 000

(40 000)

$44

Owing to an oil glut, the net realisable value for a barrel of the same grade of oil was $40 per barrel on 31 December 2015. In 2016, the company disposed of the 15 000 barrels of oil in the ending inventory for $600 000. No additional purchases were made in 2016. Olsen’s Ltd uses a periodic inventory system and the average cost flow method. Ignore GST.

Required

Complete the following partial income statements for 2015 and 2016 under the average cost flow method and the lower of cost and net realisable value rule.

OLSEN’S LTD Income Statements for the years 2015 and 2016
	Average cost		LC & NRV
	2015	2016	2015	2016
INCOME: Sales	$4 680 000	$600 000	$4 680 000	$600 000
Cost of sales:
Beginning inventory	1 320 000	660 000	1 320 000	600 000
Purchases	3 300 000	—	3 300 000	—
Cost of goods available for sale	4 620 000	660 000	4 620 000	600 000
Less: Ending inventory	660 000	—	600 000	—
Cost of sales	3 960 000	660 000	4 020 000	600 000
GROSS PROFIT	$720 000	$(60 000)	$660 000	$nil

FIFO method — perpetual inventory system

Tamworth Trading Ltd is a company operating in the retail sector. The beginning inventory of Product EF5089 and information about purchases and sales made during June are shown below:

June

Inventory

Purchases

Sales

Purchases

Sales

Purchases

Sales

6 100

4 600

4 100

3 100

2 900

3 100

2 600

units

$2.20

2.25

2.40

2.50

Tamworth Trading Ltd uses the perpetual inventory system, and all purchases and sales are on credit. Selling price is $5 per unit. GST is 10% and is not included in any of the costs and selling prices above. A stocktake on 30 June revealed 5150 units in inventory.

Required

Using the FIFO method, prepare appropriate purchases and sales journals to record these events.
Prepare an appropriate inventory record for Product EF5089 for June, and post the journals prepared in requirement A above to the appropriate general ledger accounts (assuming that product EF5089 is the only product bought and sold by Tamworth Trading Ltd).
Prepare an income statement for Tamworth Trading Ltd for June.

Product		FIFO Method
		Purchases			Sales			Balance
Date	Explanation	Unit	Unit Cost	Total Cost	Unit	Unit Cost	Total Cost	Unit	Unit Cost	Total Cost
1/6	Balance							6100	$2.20	13420
4/6	Purchases	4600	$2.25	10350				6100	$2.20	13420
								4600	$2.25	10350
9/6	Sales				4100	$2.20	9020	2000	$2.20	4400
								4600	$2.25	10350
12/6	purchases	4100	$2.40	9840				2000	$2.20	4400
								4600	$2.25	10350
								4100	$2.40	9840
21/6	Sales				2000	$2.20	4400	3500	$2.25
					1100	$2.25	2475	4100	$2.40	17715
24/6	Sales				2900	$2.25	6525	600	$2.25
								4100	$2.40	11190
26/6	Purchases	3100	$2.50	7750				600	$2.25
								4100	$2.40
								3100	$2.50	18940
30/6	Sales				600	$2.25	1350	2100	$2.40
					2000	$2.40	4800	3100	$2.50	12790
30/6	Missing inventory				50	$2.40	120	2050 3100	$2.40 $2.50	$12670
							$28690

Sales Journal

Date	Account	Post Ref	Sales	GST payable	Receivable	Cost of sales
9/6	(4100 units @ $5)	ü	$20 500	$2 050	$22 550	$9 020
21/6	(3100 units @ $5)	ü	15 500	1 550	17 050	6 875
24/6	(2900 units @ $5)	ü	14 500	1 450	15 950	6 525
30/6	(2600 units @ $5)	ü	13 000	1 300	14 300	6 150
			$63 500	$6 350	$69 850	28 570
			(400)			(500)

Purchases Journal

Date	Account	Post Ref	Inventory	GST receivable	Payable
4/6	(4600 units @ $2.25)	ü	$10 350	$1 035	$11 385
12/6	(4100 units @ $2.40)	ü	9 840	984	10 824
26/6	(3100 units @ $2.50)	ü	7 750	775	8 525
			$27 940	$2 794	$30 734
			(500)

General Journal

30/6 Dr Inventory loss $120

Cr Inventory $120

Stocktake revealed that 50 units are missing

GENERAL LEDGER

Sales					No. 400
Date	Explanation	Post Ref.	Debit	Credit	Balance
June 30	Balance	SJ		$63 500	$63 500

Inventory						No. 500
Date	Explanation	Post Ref.	Debit	Credit	Balance
June 1	Balance				$13 420
30	Purchases	PJ	$27 940		41 360
30 30	Cost of sales Missing inventory	SJ GJ		28 570 120	12 790 12670

TAMWORTH TRADING LTD Income Statement for the month ended 30 June
INCOME
Sales	$63 500
Less: Sales returns and allowances	—
Net sales	63 500
Less: Cost of sales Less: Inventory loss	28 570 120
GROSS PROFIT	34 810
LESS: EXPENSES	—
PROFIT	$34 810

Product		LIFO Method
		Purchases			Sales			Balance
Date	Explanation	Unit	Unit Cost	Total Cost	Unit	Unit Cost	Total Cost	Unit	Unit Cost	Total Cost
1/6	Balance							6100	$2.20	13420
4/6	Purchase	4600	$2.25	10350				6100	$2.20
								4600	$2.25	23770
9/6	Sales				4100	$2.25	9225	6100	$2.20
								500	$2.25	14545
12/6	Purchases	4100	$2.40	9840				6100	$2.20
								500	$2.25
								4100	$2.40	24385
21/6	Sales				3100	$2.40		6100	$2.20
								500	$2.25
								1000	$2.40	16945
24/6	Sales				1000	$2.40
					500	$2.25
					1400	$2.20		4700	$2.20	10340
26/6	Purchases	3100	$2.50	7750				4700	$2.20
								3100	$2.50	18090
30/6	Sales				2600	$2.50	6500	4700	$2.20
								500	$2.50	11590
30/6	Missing inventory				50	$2.50	125	4700	$2.20
								450	$2.50	$11465
							$29895

Product		MAC Method
		Purchases			Sales			Balance
Date	Explanation	Unit	Unit Cost	Total Cost	Unit	Unit Cost	Total Cost	Unit	Unit Cost	Total Cost
1/6	Balance							6100	$2.20	13420
4/6	Purchases	4600	$2.25	10350				10700	$2.22	23770
9/6	sales				4100	$2.22	9102	6600	$2.22	14668
12/6	Purchases	4100	$2.40	9840				10700	$2.29	24508
21/6	Sales				3100	$2.29	7099	7600	$2.29	17409
24/6	Sales				2900	$2.29	6641	4700	$2.29	10768
26/6	Purchases	3100	$2.50	7750				7800	$2.37	18518
30/6	Sales				2600	$2.37	6162	5200	$2.37	12356
30/6	Missing Inventory				50	$2.37	119	5150	$2.37	$12237
							$29123

Buy Lower of Cost And Net Realisable Value Answers Online

Talk to our expert to get the help with Lower of Cost And Net Realisable Value to complete your assessment on time and boost your grades now

The main aim/motive of the management assignment help services is to get connect with a greater number of students, and effectively help, and support them in getting completing their assignments the students also get find this a wonderful opportunity where they could effectively learn more about their topics, as the experts also have the best team members with them in which all the members effectively support each other to get complete their diploma assignments. They complete the assessments of the students in an appropriate manner and deliver them back to the students before the due date of the assignment so that the students could timely submit this, and can score higher marks.Â The experts of the assignment help services at urgenthomework.com are so much skilled, capable, talented, and experienced in their field of programming homework help writing assignments, so, for this, they can effectively write the best economics assignment help services.

Get Online Support for Lower of Cost And Net Realisable Value Assignment Help Online

Resources

24 x 7 Availability.
Trained and Certified Experts.
Deadline Guaranteed.
Plagiarism Free.
Privacy Guaranteed.
Free download.
Online help for all project.
Homework Help Services

Testimonials

Urgenthomework helped me with finance homework problems and taught math portion of my course as well. Initially, I used a tutor that taught me math course I felt that as if I was not getting the help I needed. With the help of Urgenthomework, I got precisely where I was weak: Sheryl. Read More

Not the Exact Question you were looking for ? Post your question for assignment help and get instant help on your homework and assignment questions from our experts