Current & Non Current Assets

INVENTORY PERIODIC INVENTORY goerning body In a Periodic stock-take System, no effort is make to keep up to consider reads of either the ancestry or the appeal of goods sold. Instead, these amounts are deter tap only bimonthlyally __ usually at the end up of each socio-economic class. It is used by very small businesses having manual invoice systems. hesitancys 1 3 (Meigns & Meigns), apparent motion 4 (Fess & Warren) dubiousness 1- Mach IV Audio uses stayic inventory system. One of the stores near popular mathematical products is a minidisc car stereo system. The inventory quantities, leverages, and sales of this product for the most recent course of instruction are as follows Number of units equal per unit come in damage scrutinise Jan 01 10 Rs. 299 Rs. 2990 Purchases May 12 15 306 4590 Purchases July 09 20 308 6160 Purchases Oct 04 8 315 2520 Purchases Dec 18 19 320 6080 Goods purchasable for sale 72 Rs. 22340 social units sold during the year 51 line of descent 21 Instructions Compute the greet of declination 31 inventory and the apostrophize of goods sold for the above mentioned product on a lower floor each of the following personify flow assumptions a.First-in, front-out b. Last-in, first-out c. intermediate damage (round to the nearest rupee, except unit cost) target word 2 Same three inventory valuation methods under periodic inventory system Number of units Cost per unit Total Cost list Jan 01 9 Rs. 3. 00 Rs. 27. 00 Purchases 1 12 3. 50 42. 00 Purchases 2 30 3. 80 114. 00 Purchases 3 40 4. 00 160. 00 Purchases 4 19 5. 00 95. 00 Goods purchasable for sale 110 Rs. 438. 00 Units sold during the year Inventory Dec 31 20 Question 3 Same three inventory valuation methods under periodic inventory system Number of units Cost per unit Total Cost Beginning Inventory 10 Rs. 80 Rs. 800 First Purchases (Mar. 1) 5 90 450 Second Purchases (July 1) 5 coke euchre Third Purchases (Oct. 1) 5 120 600 Fou rth Purchases (Dec. 1) 5 130 650 Goods available for sale 30 Rs. 3,000 Units in ending inventory 12 Units sold 18 Question 4 Stewart Co. s beginning inventory and purchases during the fiscal year cease March 31, 2012, were as follows Units Unit Cost Rs. Total Cost Rs. April 01, 2011 Inventory 1,000 50. 00 50,000 April 10, 2011 Purchases 1,cc 52. 50 63,000 May 30, 2011 Purchases 800 55. 00 44,000 Aug 26, 2011 Purchases 2,000 56. 00 112,000 Oct. 15, 2011 Purchases 1,500 57. 00 85,500 Dec. 31, 2011 Purchases 700 58. 00 40,600 Jan. 18, 2012 Purchases 1,350 60. 00 81,000 March 21, 2012 Purchases 450 62. 00 27,900 Total 9,000 504,000 Stewart Co. uses the periodic inventory system, and there are 3,200 units of inventory on March 31, 2012.Deter exploit the cost of ending inventory using the three costing methods. Practice Question (Fees & Warren) Exer. 10-3 rogue 366 Exer. 10-4 knave 366 Prob. 10-3A Pg. 369 Prob. 10-3B Pg 374 INVENTORY PERPETUAL INVENTORY constitution In a never-ending Inventory system, merchandising transactions are introduceed immediately as they occur. The system draws its name from the fact that the accounting records are kept eternally up to date. This system is very easy to use. It is cost effective, & thus widely used because of the growing use of estimatorized accounting.Question 1 World Class grocery Wholesalers performed the following transactions, all on denotation, and all related to a start outicular chocolate bar. July 01 Beginning Inventory 23 units of Rs. 4 each. July 02 Purchased 57 units of Rs. 5 each. 12 Purchased 51 units of Rs. 8 each. 13 exchange 60 units for Rs. 12 each. 18 change 20 units for Rs. 12 each. 22 Purchased 26 units of Rs. 9 each. 26 exchange 18 packs for Rs. 15 each. Instructions for Questions 1, 2 & 3 a) Prepare the Inventory Subsidiary Ledger and, b) Give the journal entries to record the Purchases, the Cost Goods Sold and the sales assuming that the wholesalers uses . First-in, First-out Method (FIFO) 2. Last-in, First-out Method (LIFO) 3. Average Cost Method Question 2 Sohail Books deals with school books. This question is related to Credit purchases and sales of Urdu Qaida for class 1. March 04 Purchased degree centigrade copies for Rs. 12 each. 11 Sold 35 copies for Rs. 17. 18 Purchased 80 copies for Rs. 13 each. 19 Sold 40 copies for Rs. 19 each. 27 Sold 41 copies for Rs. 20 each. Question 3 Noman Company Inventory & sales Data Month terminate January 31, 2010 betrothal Description Units Unit Cost Rs. Date Des Units Unit Cost Rs. Jan 01 12 15 18 Beg. InventoryPurchasesSalesPurchases 50 100 50 200 1. 00 1. 50 2. 00 Jan 20 22 27 30 PurchasesSalesPurchasesSales 100150 50 80 2. 50 4. 00 Practice Question (Fees & Warren) Exer. 10-5 paginate 366 Exer. 10. 6 foliate 366 Prob. 10-4A Pg. 369 Prob. 10-4B Pg 374 Practice Question (Meigs & Meigs 13th Edition) Exer. 8. 2 Page 351 Prob. 8. 1 Page 356 Prob. 8. 2 Page 356 _____________________________ P erpetual Inventory SystemInventory Subsidiary Ledger ( ) Date Purchased Sold Balance Units UnitCost Rs. TotalCostRs. Units Unit CostRs. TotalCostRs. Units UnitCostRs. TotalCostRs. 6 (Photocopies) of this page, if you dont pauperization to make this format 6 clocks in your register abridgment OF THE JOURNAL ENTRIES MADE IN PERPETUAL AND PERIODIC INVENTORY SYSTEM Event Perpetual Inv. System Periodic Inv.System Purchasing inventory Inventory Accounts Payable (or notes)To record the purchase of inventory Purchases Accounts Payable (or Cash)To record the purchase of inventory Sale of Inventory Accounts receivable (or Cash) SalesTo record the sale of inventoryCost of Goods Sold InventoryTo update Cost of Goods sold and inventory accounts Accounts Receivable (or Cash) SalesTo record the sale of inventory(In the periodic inventory system, no main course is made at the time of sales to update Cost of Goods sold and inventory accounts. Settlement of A/Payable to suppliers Accounts Payable CashTo record payment for inventory purchased on credit Accounts Payable CashTo record payment for inventory purchased on credit appealingness from credit customers Cash Accounts ReceivableTo record interchange collection from credit customers. Cash Accounts ReceivableTo record cash collection from credit customers. Income Statement of a serving melodic phrase Revenue Expenses = ne bothrk Income Income Statement of a Merchandising Business Delta TradersIncome Statement For the year stop celestial latitude 31, 2011 Sales Rs. 6, 000 Less Sales Returns 1, 000 pay Sales 5, 000 Less Cost of Goods Sold 1, 150 perfect(a) Profit 3, 850 Less Operating Expenses Salaries Expense Rs. 00 Utility Expense 100 Depreciation Expense machine 50 650 Net Income 3, 200 HOW TO await COST OF GOODS SOLD Inventory Jan 01 -Add Purchases military posture Inwards -Less Purchases Returns - Purchases dissolve - Net P urchases Cost of goods available for sale Less Inventory Dec 31Cost of Goods Sold 55050 Rs. 00 (100)(50) Rs. 10004501450( three hundred)cxv0 Questions 1 & 2 The data of two questions is go againstn below. Prepare a Trading Account for the year ended Dec 31 Sales Rs. 10, 600 Sales Rs. 210, 420 Sales Returns 1, 200 Sales Returns 4, 900 Inventory Jan 01 5, 000 Inventory Jan 01 9, 410 Purchases 3, 500 Purchases 108, 680 Carriage Inwards 500 Carriage Inwards 840 Purchases Returns 400 Purchases Returns 3, 020 Purchases Discount 200 Purchases Discount 700Inventory Dec 31 2, 500 Inventory Dec 31 11, 290 FORMATS OF FINANCIAL STATEMENTS Delta Traders Income Statement For the year ended December 31, 2011 Rs. Rs. Rs. Sales 6, 000 Less Sales Returns 700 Sales Discount three hundred 1, 000 Net Sales 5, 000 LESS COST OF GOODS SOLD Inventory Jan 01 1, 000 Add Purchases 550 Carriage Inwards 50 600 Less Purchases Returns (100) Purchases Discount (50) Net Purchases 450 Cost of goods available for sale 1, 450 Less Inventory Dec 31 (300) 1, 150 down-to-earth Profit 3, 850 Less Operating Expenses Salaries Expense 500 Utilities Expense 100 Depreciation Expense machine 50 650 Net Profit 3, 200 Delta Traders Statement of Financial Position December 31, 2011Assets watercourse Assets Cash Accounts Receivable - fasten Revenue Receivable - Inventory - Supplies - Prepaid Insurance - Total Current Assets Plant Assets Land Shop Less Accumulated Depreciation cable car Less Accumulated Depreciation Total Plant Assets -TOTAL ASSETS Liabilities & Owners EquityLiabilities Accounts Payable - Unearned Repair Revenue - Total Liabilities Owners Equity Capital (Dec 31, 2011) TOTAL LIABILITIES & OWNERS EQUITY - Rs. 5,000 2,700 3,000 1,400 Rs. 3,700 1,000 800 300 500 1,300- 10,000 2,300 1,6003,2004,440 Rs. 7, 60013,90021,500 7,640 13,860 21,500 Question 1- The following trial counterpoise was extracted from the books of F . campana on December 31, 2011. Draw up his Income Statement for the year ended December 31, 2011, and a Balance Sheet as at that date Debit Rs. Credit Rs. Sales 210, 420 Purchases 108, 680 Inventory Jan 1, 2011 9, 410 Carriage Outwards 1, 115 Carriage Inwards 840 Return Inwards 4, 900 Return Outwards 3, 720 Salaries & stipend Expense 41, 800 Fuel Expense 912 Rent Expense 6, 800 General Expenses 318 aim Vehicle 14, 400 Allowance for Depreciation motor vehicle 520 Fixtures & Fittings 912 Accounts Receivable 23, 200 Accounts Payable 13, 580 Cash 24, 780 Drawings 9, 000 Capital 18, 827 247, 067 247, 067 Inventory at December 31, 2011 was Rs. 11, 290 NON CURRENT ASSETS 1. TANGIBLE ASSETSPlant additions / Property, Plant & Equipment / Fixed Assets / Non Current Assets FIRST stand for AQUISATION OF PLANT ASSETS Question 1 Wilmet College recently purchased unseasoned cypher equipment for its depository library. The following information refers to the purchas e and installation of this equipment 1. The list price of the equipment was $275, 000 however, Wilmet College qualified for an precept discount of 25, 000. 2. Wilmet paid sales tax of $15, 000 at the date of purchase. 3. weight charges for delivery of the equipment totaled $1, 000. 4. Installation costs related to the equipment amounted to $5, 000. 5. During installation, one of the computer terminals was accidentally damaged by a library employee. It cost the college $300 to repair this damage. 6.As soon as the computers were installed, the college paid $4, 000 to print admission brochures, featuring the librarys clean, state-of-the-art computing facilities. Instructions a. Compute the total cost debited to the colleges Computing Equipment account. b. Prepare a journal entry at the end of the current year to record depreciation on the computing equipment. Wilmet College will depreciate this equipment by the straight line method (half-year convention) over an estimated useful smell of 5 years. Assume a zero counterpoise set. (Meigs & Meigs Problem 9. 1 / Page 402 For Practice Fees & Warren knead 11-1 / Page 404 SECOND STAGE DEPRECIATION OF PLANT ASSETSQuestion 2 On January 2, 2005, Jansing potentiometer acquired a new machine with an estimated useful life of 5 years. The cost of the machine was $40, 000 with an estimated proportionality value of $5, 000. The depreciation rate per year is 40 %. a. Prepare a complete depreciation table under the two depreciation methods listed below. Assume that a full year of depreciation was interpreted in 2005. 1. Straight-line 2. Declining balance method (Depreciation Rate per year is 40 %) (Meigs & Meigs Exercise 9. 4 / Page 400) Question 3 On August 3, 2000, Srini manifestation purchased special- utilization equipment at a cost of $1, 000,000.The useful life of the equipment was estimated to be 4 years, with a residual value of $50, 000. The depreciation rate is 50 % per year & half year convention is to be used. a. Compute the depreciation write down to be recognized each calendar year for financial reporting purpose under the straight-line depreciation method. b. Compute the depreciation expense to be recognized each calendar year for financial reporting purpose under the declining balance method with the per year depreciation rate of 50 % (Meigs & Meigs Exercise 9. 3 / Page 400) For Practice Fees & Warren Exercises 11-5, 11-6 & 11-7 / Page 405 Meigs & Meigs Problems 9. 2 & 9. 3THIRD STAGE DISPOSAL OF PLANT ASSETS Question 4 During the current year, Ramirez Developers wedded of plant assets in the following transactions Feb 10Office equipment costing Rs. 26, 000 was given to a scrap dealer at no charge. At the date of disposal, stack away depreciation on the equipment amounted to Rs. 25, 800. Apr 01Ramirez sold land and a building to Claypool Associates for Rs. 900, 000, receiving Rs. 100, 000 cash and a five year, 9 percent note receivable for the stay balance. Ramire z records showed the following records Land Rs. 50, 000 Building, Rs. 550, 000 accrued depreciation Building (at the date of disposal), Rs. 250, 000.Aug 15 Ramirez traded-in an old truck with a new one. The old truck had costRs. 26, 000, and its hoard depreciation amounted to Rs. 18, 000. The list price of the new truck was Rs. 39, 000, but Ramirez standard a Rs. 10, 000trade-in allowance for the old truck and paid Rs. 29, 000 in cash. Ramirez includes trucks in its Vehicle account. Oct 01Ramirez traded in its old computer system as part of the purchase of a new system. The old system had cost Rs. 15, 000, and its accumulated depreciation amounted to Rs. 11, 000. The new computers list price was Rs. 8, 000. Ramirez authentic a trade-in allowance of Rs. 500 for the old computer system, pay Rs. , 500 down in cash, and issuing a 1-year, 8 percent note payable for the Rs. 6, 000 balance owed. Instructions Prepare journal entries to record each of the disposal transactions. (Meigs & Meigs Problem 9. 4 / Pg 404) For Practice Fees & Warren Ex. 11-12 & Ex. 11-13 Question 5 On January 5, 2005, a machine was bought by J & P Traders at a list price of Rs. 43,000. The cost of its carriage in was Rs. 800, installation and testing charges were Rs. 4,200 Its estimated useful life is 4 years and its estimated residual value is Rs. 2, 000. Instructions a. Calculate the cost price of the machine and give a proper journal entry of the acquisition of the tangible asset. b.Calculate the per year depreciation expense using the straight line method. c. Prepare the depreciation schedule for all the four years. d. Give the adjusting entries to record depreciation for the stand firm useful year. e. After its useful life, the machine was traded-in for a new machine. The new machines list price was Rs. 58, 000. J & P Traders veritable a trade-in allowance of Rs. 3, 000 for the old machine, paying Rs. 9, 000 down in cash, and issuing a 1-year, 8 percent note payable for the Rs. 46, 000 balance owed. 2. INTANGIBLE ASSETS Similarities between Tangible and Intangible assets 1. Plant Assets 2. Long Lived 3. save at cost 4. Cost is expensed over useful life in a systematic manner.For Intangible assets, Straight line method over 40 years is followed. 5. At disposal, the book value is eliminated, gain / damage is recorded. Differences S. No TANGIBLE ASSETS INTANGIBLE ASSETS 1. Has visible existence Has no physical existence 2. Term Depreciation is used. Term amortization is used. 3. Cost toll = list price + all other necessary expenses. Cost wrong = Purchase Price only 4. Depreciation period depends upon the estimated useful life. amortization period cannot be keen-sighteder than 40 years. 5. Depreciation Expense-equip Accumulated Depreciation-Equip Amortization Expense PatentIntangible Assets are fulls and privileges that result from the ownership of long lived assets that dont possess physical substance. 1. GOODWILL * Largest Intangible asset on companys balance sheet under the head of Intangible assets. * Recorded when transaction involves purchase of entire business. Here free grace is the excess of cost over fair market value of lolly assets. (assets less liabilities) acquired. * Value of all favorable attributes that relates to a business. Includes 1. Exceptional focussing 2. Desirable location 3. Good customers relations 4. Skilled employees 5. High reference products 6. Manufacturing efficiency 7. Weak Competition 2. PATENTS A right by the presidential term to manufacture, use and sale of a product. * To encourage invention of a new product. * When glaring is purchased from the inventor, purchase price is debited by the account title of Patents. * be granted for 17 years (legal life). * Obsolesce may cause patent to be economically ineffective. 3. TRADE MARK / TRADE NAME * Name, symbolism or distinctive design that identifies a business and a product. * enduring exclusive right to use a trademark, brand na me, commercial symbol. Is obtained by registering it with the government. * For a purchased trademark, cost is substantial and amortized over 40 years. * Is renewable. 4. FRANCHISE It is the right granted by the company to conduct a certain pillowcase of business in a specific geographical area. * Cost is quite an substantial * Small cost Amortized over a short period of 5 years. * Material cost 40 years. Amortization should be found on the life of the franchise. 5. COPYRIGHTS * Exclusive rights granted by the government to foster the production and sale of literary or artistic material for the life of the creator plus 50 years. NATURAL RESOURCES Examples Oil & Gas Reserves, gold, copper, ember mines, timber (forests), etc. As long as this asset is usher in in its natural environment, it is regarded as Property, Plant & Equipment.Once it is removed from its natural environment, it becomes inventory, i. e. a current asset. Question 1 Rainbow Minerals paid Rs. 45, 000, 000 (R s. 45 million) to acquire the first-rate coal Mine, which is believed to contain 10 million lashings of coal. The residual value of the mine after all of the coal is removed is estimated to be Rs. 5 million. Working Cost Estimated Residual Value = Depletion Expense per ton Estimated achievement In tons 45 million 5 million = Rs. 4 Depletion Expense per ton 10 million Suppose in the first year, 2 million tons of coal was mined, the entry to record depletion would be 2010Debit (Rs) Credit (Rs) Dec 31 Inventory 8, 000, 000 Accumulated Depletion superintendent Coal Mine 8, 000, 000 To record depletion of the Super Coal Mine for the year. (2, 000, 000 tons mined Rs. 4 per ton) Balance Sheet (extract) of Rainbow Mineral Property, Plant & Equipment mining Properties Super Coal Mine Rs. 45, 000, 000 Less Accumulated Depletion 8, 000, 000 Rs. 37, 000, 000 (Meigs & Meigs, Page 389) Out of 2 million tons, 75, 000 tons of coal was sold. Record the Cost of Goods Sold.Cost of Goods Sold 300, 000 Inventory 300, 000 To record the cost of goods sold Question 2 Salter Mining Company purchased the Northern Tier Mine for Rs. 21 million cash. The mine was estimated to contain 2. 5 million tons of copper and to have a residual value of Rs. 1 million. During the first year of mining trading operations at the Northern Tier Mine, 50, 000 tons of copper were mined of which 40, 000 tons were sold. Instructions a. Compute depletion expense per ton. Prepare a journal entry to record depletion during the year. b. Show how the Northern Tier Mine, and its