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Business Studies

Components of Physical Distribution

Which invento...

Question

Which inventory price method assumes that the goods most recently purchased are sold first?

A

FIFO

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B

Specific identifications

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C

Weighted average

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D

LIFO

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Solution

The correct option is D LIFO
In the LIFO method, Inventory which is purchased recently is issued first. It is called last in first out.
Available closing stock will have the stock of older items with older price.

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Q. Under inflationary conditions, which of the following method of inventory valuation will show lowest cost of goods sold ?

Q. Which of the following statements are correct?
I. Inventory includes raw materials, finished goods and work-in-progress
II. Inventory is a part of the working capital
III. Inventory includes goods likely to be purchased.

Q. Journalise the following transactions in the books of M/s. R.K. & Co.:
(i) Purchased goods of list price of ₹ 20,000 from Vishal at 20% trade discount against cheque payment.
(ii) Purchased goods of list price of ₹ 20,000 from Naman at 15% trade discount against cash.
(iii) Purchased goods of list price of ₹ 30,000 from Amrit at 20% trade discount.
(iv) Purchased goods of list price of ₹ 40,000 for ₹ 35,000 for cash.
(v) Goods returned of list price ₹ 10,000 purchased from Amrit.
(vi) Sold goods to Parul of list price of ₹ 40,000 at 10% trade discount against cheque payment.
(vii) Sold goods to Aman of list price of ₹ 30,000 at 10% trade discount against cash.
(viii) Sold goods to Pawan of list price of ₹ 20,000 at 10% trade discount.
(ix) Sold goods to Yamini of list price of ₹ 25,000 for ₹ 23,000.
(x) Sold goods costing ₹ 10,000 at cost plus 20% less 10% trade discount to Bhupesh.
(xi) Sold goods purchased at list price of ₹ 50,000 less 15% trade discount sold at a profit of 25% less 10% trade discount against cheque.
(xii) Aman returned goods of list price of ₹ 10,000 sold to him at 10% trade discount.

Q. The cost of inventory as per physical verification as on 24th March was Rs.4,00,000. Between 24th March and 31st March , the following transaction took place:
(a) Purchases Rs.2,00,000 out of which 20% goods were returned
(b) Sales of Rs.2,00,000 out of which 20% goods were returned. Goods are sold at a profit of 25% on cost. The cost of inventory as per books is __________.

Q. From the following information, calculate value of Opening Inventory:

Closing Inventory	=	₹ 68,000
Total Sales	=	₹ 4,80,000 (including Cash Sales ₹ 1,20,000)
Total Purchases	=	₹ 3,60,000 (including Credit Purchases ₹ 2,39,200)

Goods are sold at a profit of 25% on cost.

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