CH9 - COGS & The Treatment Of Inventories

Question 1

Formula Cost

Answer 1

Opening inventory + Purchases - Closing inventory

Question 2

Formula Selling price, margin and mark up

Answer 2

Sp = cost + Profit
Margin based on sales
Mark up based on cost

Question 3

Daniel made an error when he calculated the value of his closing inventory, which means that the inventory is OVERVALUED.
How are his NET PROFIT for the year and NET ASSETS at the end of the year affected by this error?

Answer 3

NET PROFIT Overstated
NET ASSETS Overstated

Question 4

Inventory valued at

Answer 4

Lower cost

Question 5

Formula Net realisable value (NRV)

Answer 5

Selling price - further cost

Question 6

Agnes sold some items of inventory for $1,950 in cash which she had bought for $2,622.
How are her assets and capital affected by the sale?

Answer 6

ASSETS Reduce by $672
CAPITAL Reduced by $672

Question 7

In times of RISING PRICES,

Answer 7

LIFO FIFO
COS HIGHEST LOWEST
C/S LOWEST HIGHEST
PROFIT LOWEST HIGHEST

Question 8

Carriage inwards (angkutan masuk)

Answer 8

Masuk dlm COS kena tmbh

Question 9

Opening inventory adjustment.

Answer 9

Dr SOPL ( cost of sales )
Cr SOFP ( asset )

Question 10

Closing inventory adjustment.

Answer 10

Dr SOFP ( asset )
Cr SOPL ( cost of sales )

Question 11

When closing stock increase,
COGS decrease,
Gross profit decrease

Question 12

Inventory valuation

Answer 12

Inventory valuation should exclude profit that has not yet been earned

Question 13

His closing inventory cost $3000 less than his opening inventory.

Answer 13

Kena tmbh dkt COGS formula