Vanguard Manufacturing Company extracted the following closing inventory balances at the end of its accounting period:
| Inventory Category | Amount (₦) |
|---|---|
| Raw materials | 65,000 |
| Work-in-progress | 35,000 |
| Finished goods (at transfer value) | 100,000 |
Finished goods are transferred from the factory to the trading account at cost plus a mark-up. What is the total carrying value of inventories (in ₦) to be presented under current assets in the statement of financial position?
Answer: 180000 ₦
Answer
The total carrying value of inventories to be presented under current assets in the statement of financial position is ₦180,000.
The total carrying amount of inventories presented under current assets is ₦180,000. This is calculated by eliminating the ₦20,000 unrealized profit provision (25/125 × ₦100,000) from finished goods to reduce it to its cost of ₦80,000, then adding raw materials (₦65,000) and work-in-progress (₦35,000).
Step-by-Step Solution
Key Concept
Balance sheet presentation of manufacturing inventories requires deducting the provision for unrealized profit from closing finished goods to ensure all inventories are valued at actual cost under current assets.