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Difficulty: EasyBalance Sheet Presentation of Manufacturing Inventories and Provisions

Apex Manufacturing Enterprise recorded the following closing inventory balances at the end of its trading period:
- Raw materials inventory: ₦15000\text{₦}15{}000
- Work-in-progress inventory: ₦10000\text{₦}10{}000
- Finished goods inventory: ₦25000\text{₦}25{}000

A provision for unrealized profit of ₦2500\text{₦}2{}500 was created on the finished goods inventory.

What is the total value of manufacturing inventories (in ₦\text{₦}) to be presented under current assets in the statement of financial position?

Answer: 47500 ₦

Answer

The total value of manufacturing inventories presented under current assets in the statement of financial position is ₦47,500.
Manufacturing inventories listed under current assets in the statement of financial position consist of raw materials, work-in-progress, and finished goods reduced by any provision for unrealized profit. Deducting the ₦2,500 provision from ₦25,000 finished goods gives ₦22,500. Adding raw materials (₦15,000) and work-in-progress (₦10,000) results in a total inventory valuation of ₦47,500.

Step-by-Step Solution

1
Deduct the provision for unrealized profit from the finished goods inventory
Net Finished Goods Inventory = ₦25,000 - ₦2,500 = ₦22,500
The provision for unrealized profit must be deducted from finished goods to ensure inventory is presented at original cost to the entity.
2
Sum all three manufacturing inventory categories
Total Inventory = ₦15,000 (Raw Materials) + ₦10,000 (WIP) + ₦22,500 (Net Finished Goods) = ₦47,500
Manufacturing inventories presented under current assets comprise raw materials, work-in-progress, and net finished goods.

Key Concept

Balance Sheet Presentation of Manufacturing Inventories and Provision for Unrealized Profit
Estimated Time:1m 0s
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Balance Sheet Presentation of Manufacturing Inventories and Provisions

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