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Zorluk: OrtaBalance Sheet Presentation of Manufacturing Inventories and Provisions

Sovereign Manufacturing Enterprise extracted the following closing inventory figures and provision balances at the end of its accounting year:

Inventory / Provision ItemAmount (₦\text{₦})
Raw materials inventory85,00085,000
Work-in-progress inventory42,00042,000
Finished goods inventory (at transfer price)160,000160,000
Provision for unrealized profit16,00016,000

What is the net total value of manufacturing inventories to be presented under Current Assets in the Statement of Financial Position (Balance Sheet)?

  1. A
    ₦303,000\text{₦}303,000
  2. B
    ₦287,000\text{₦}287,000
  3. ₦271,000\text{₦}271,000Cevap
  4. D
    ₦229,000\text{₦}229,000

Cevap

The net total value of manufacturing inventories presented under Current Assets is ₦271,000\text{₦}271,000.
In a manufacturing entity's Statement of Financial Position, all three types of inventory (raw materials, work-in-progress, and finished goods) are reported under Current Assets. Finished goods transferred at a markup must be shown net of the provision for unrealized profit (₦160,000−₦16,000=₦144,000\text{₦}160,000 - \text{₦}16,000 = \text{₦}144,000). Adding raw materials (₦85,000\text{₦}85,000) and work-in-progress (₦42,000\text{₦}42,000) gives ₦271,000\text{₦}271,000.

Adım Adım Çözüm

1
Calculate the net valuation of finished goods inventory at cost price
Net Finished Goods = Gross Finished Goods - Provision for Unrealized Profit = ₦160,000−₦16,000=₦144,000\text{₦}160,000 - \text{₦}16,000 = \text{₦}144,000
Finished goods transferred at a markup must be reduced by the provision for unrealized profit so they appear at actual cost in the Statement of Financial Position.
2
Sum all manufacturing inventory components under Current Assets
Total Inventories = Raw Materials + Work-in-Progress + Net Finished Goods = ₦85,000+₦42,000+₦144,000=₦271,000\text{₦}85,000 + \text{₦}42,000 + \text{₦}144,000 = \text{₦}271,000
All three forms of inventory (raw materials, WIP, finished goods at cost) are combined to show total closing inventory under current assets.

Anahtar Kavram

Valuation and presentation of manufacturing inventories and provision for unrealized profit in the balance sheet
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Konular

Balance Sheet Presentation of Manufacturing Inventories and Provisions

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