A head office invoices goods to its dependent branch at a selling price loaded with a mark-up of on cost. At the end of the financial year, the head office records show goods dispatched to the branch at an invoice price of , but the branch recorded receiving goods valued at . The branch's physical inventory count at the close of the period showed stock on hand valued at at invoice price. What is the total stock reserve (unrealized profit) required for the combined closing stock, including goods in transit, at the financial year-end?
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Cevap
The total stock reserve required for the total closing stock, including goods in transit, is ₦12,750.
To find the total unrealized profit (stock reserve), we must first identify all stock owned at year-end at invoice price. Goods sent (₦180,000) less goods received (₦165,000) leaves ₦15,000 in transit. Adding this to the physical inventory (₦36,000) gives a total closing stock of ₦51,000 at invoice price. Converting the mark-up of 33 1/3% (1/3 on cost) yields a margin of 25% (1/4 on invoice price). Taking 25% of ₦51,000 gives ₦12,750.
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Accounting for Goods in Transit and Stock Reserve on Closing Inventory at Invoice Price
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