Balance Sheet Presentation of Manufacturing Inventories and Provisions

6 soru

Zenith Manufacturing Enterprise extracted the following closing inventory figures and adjustment details at the end of its financial year:

- Raw materials inventory: ₦45,000
- Work-in-progress inventory: ₦28,000
- Finished goods inventory (at market transfer value): ₦75,000
- Provision for unrealized profit on closing finished goods: ₦15,000

What is the total value of manufacturing inventories (in Naira) to be presented under current assets in the Statement of Financial Position?

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Cevap: 133000

Cevap

The total value of manufacturing inventories to be presented under current assets in the Statement of Financial Position is ₦133,000.

In the Statement of Financial Position of a manufacturing business, inventories are disclosed under current assets. Raw materials (₦45,000), work-in-progress (₦28,000), and finished goods are summed together. Finished goods transferred at market value must be stated at original prime/production cost by subtracting the provision for unrealized profit (₦75,000 - ₦15,000 = ₦60,000). Thus, total manufacturing inventories equal ₦45,000 + ₦28,000 + ₦60,000 = ₦133,000.

Adım Adım Çözüm

Deduct the provision for unrealized profit from finished goods inventory at transfer value.

Net finished goods inventory = ₦75,000 - ₦15,000 = ₦60,000.

Finished goods transferred at a market value above cost include an internal profit element, which must be eliminated via a provision for unrealized profit so that inventory is reported at original cost in the financial statements.

Sum all three categories of manufacturing inventory (Raw Materials, Work-in-Progress, and Net Finished Goods).

Total manufacturing inventories = ₦45,000 + ₦28,000 + ₦60,000 = ₦133,000.

All three forms of inventory are current assets and must be aggregated for total inventory presentation under current assets in the Statement of Financial Position.

Anahtar Kavram

Balance Sheet Presentation of Manufacturing Inventories and Provision for Unrealized Profit

Soru 2Soru →

Kibo Manufacturing Company transfers finished goods from the factory to the trading account at cost plus a $20\%$ mark-up. At the end of the financial year, the following inventory balances were extracted from the books:

- Raw Materials Inventory: $₦62,000$
- Work-in-Progress Inventory: $₦38,000$
- Finished Goods Inventory (at transfer value): $₦120,000$

What is the total net carrying amount (in $₦$ ) of manufacturing inventories to be presented under Current Assets in the Statement of Financial Position?

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Cevap: 200000

Cevap

The total net carrying amount of manufacturing inventories in the Statement of Financial Position is

₦200,000

In the Statement of Financial Position of a manufacturing entity, inventories under current assets must be shown at cost. Raw materials (

₦62,000

) and work-in-progress (

₦38,000

) are brought in at cost. Finished goods transferred at cost plus

20\%

(

₦120,000

) must be adjusted by deducting the provision for unrealized profit (

\frac{20}{120} \times ₦120,000 = ₦20,000

), bringing finished goods to its net cost of

₦100,000

. Summing all three yields

₦62,000 + ₦38,000 + ₦100,000 = ₦200,000

Adım Adım Çözüm

Compute the provision for unrealized profit on closing finished goods

Unrealized profit =

₦20,000

Finished goods are recorded at transfer value (cost +

20\%

markup), so profit component is

\frac{20}{120}

of transfer value.

Deduct provision for unrealized profit from finished goods transfer value

Net Finished Goods Inventory =

₦100,000

Inventories must be presented in the Statement of Financial Position at lower of cost and net realizable value, removing unrealized internal profit.

Aggregate all inventory components for Statement of Financial Position presentation

Total Current Asset Inventories =

₦200,000

Total inventories comprise Raw Materials (

₦62,000

) + Work-in-Progress (

₦38,000

) + Net Finished Goods at cost (

₦100,000

Anahtar Kavram

Valuation and presentation of raw materials, work-in-progress, and net finished goods (after deducting provision for unrealized profit) under current assets in manufacturing accounts.

Tahmini Süre:2m 0s

Soru 3Soru →

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

A provision for unrealized profit of $\text{₦}2{}500$ 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?

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Cevap: 47500

Cevap

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.

Adım Adım Çözüm

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.

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.

Anahtar Kavram

Balance Sheet Presentation of Manufacturing Inventories and Provision for Unrealized Profit

Tahmini Süre:1m 0s

Soru 4Soru →

Meridian Manufacturing Ltd extracted the following inventory figures at the end of its financial year:
- Raw materials inventory: $\text{₦}120,000$
- Work-in-progress inventory: $\text{₦}85,000$
- Finished goods inventory (at market transfer value): $\text{₦}250,000$

Finished goods were transferred from the factory to the trading account at cost plus a $25\%$ mark-up. What is the total carrying amount of manufacturing inventories to be presented under current assets in the Statement of Financial Position?

₦320,000

₦405,000

₦455,000

₦505,000

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Cevap: ₦405,000

Cevap

The total carrying amount of manufacturing inventories to be presented under current assets is ₦405,000.

The correct valuation of finished goods requires removing the unrealized profit component (₦250,000 × 25/125 = ₦50,000) to arrive at the actual cost of ₦200,000. Adding raw materials (₦120,000), work-in-progress (₦85,000), and net finished goods (₦200,000) gives total current asset inventory of ₦405,000.

Adım Adım Çözüm

Calculate the profit element (unrealized profit) included in closing finished goods.

Unrealized Profit = ₦250,000 × (25 / 125) = ₦50,000.

Since finished goods are recorded at cost plus a 25% mark-up, the transfer value represents 125% of cost, so profit is 25/125 (or 20%) of the transfer value.

Determine the net carrying value of finished goods for balance sheet presentation.

Net Finished Goods = ₦250,000 - ₦50,000 = ₦200,000.

Inventories must be valued at the lower of cost and net realizable value; unrealized profit must be deducted from finished goods to show them at cost.

Sum all manufacturing inventory components (Raw Materials + Work-in-Progress + Net Finished Goods).

Total Inventories = ₦120,000 + ₦85,000 + ₦200,000 = ₦405,000.

All three inventory types are combined to determine the aggregate inventory figure reported under current assets.

Anahtar Kavram

Balance Sheet Presentation of Manufacturing Inventories and Deduction of Provision for Unrealized Profit

Soru 5Soru →

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

Inventory / Provision Item	Amount ( $\text{₦}$ )
Raw materials inventory	$85,000$
Work-in-progress inventory	$42,000$
Finished goods inventory (at transfer price)	$160,000$
Provision for unrealized profit	$16,000$

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

\text{₦}303,000

\text{₦}287,000

\text{₦}271,000

\text{₦}229,000

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Cevap: $\text{₦}271,000$

Cevap

The net total value of manufacturing inventories presented under Current Assets is

\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 (

\text{₦}160,000 - \text{₦}16,000 = \text{₦}144,000

). Adding raw materials (

\text{₦}85,000

) and work-in-progress (

\text{₦}42,000

) gives

\text{₦}271,000

Adım Adım Çözüm

Calculate the net valuation of finished goods inventory at cost price

Net Finished Goods = Gross Finished Goods - Provision for Unrealized Profit =

\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.

Sum all manufacturing inventory components under Current Assets

Total Inventories = Raw Materials + Work-in-Progress + Net Finished Goods =

\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

Soru 6Soru →

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 $25\%$ mark-up. What is the total carrying value of inventories (in ₦) to be presented under current assets in the statement of financial position?

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Cevap: 180000

Cevap

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).

Adım Adım Çözüm

Calculate the provision for unrealized profit included in the closing finished goods inventory.

Provision for unrealized profit = ₦20,000.

Since finished goods are transferred at cost plus a 25% mark-up, the unrealized profit margin contained in the transfer price is 25/125 (or 20%).

Deduct the provision for unrealized profit from the finished goods inventory at transfer value.

Net carrying value of finished goods = ₦80,000.

Inventories must be stated at original prime/factory cost on the balance sheet by removing the internal unrealized manufacturing profit.

Sum all inventory components (raw materials, work-in-progress, and net finished goods).

Total inventory carrying amount = ₦180,000.

All three inventory elements are aggregated and presented as a single total or sub-itemized under current assets.

Anahtar Kavram

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.

Balance Sheet Presentation of Manufacturing Inventories and Provisions

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