Products

## Holooly Rewards

We are determined to provide the latest solutions related to all subjects FREE of charge!

Enjoy Limited offers, deals & Discounts by signing up to Holooly Rewards Program

## Holooly Tables

All the data tables that you may search for.

## Holooly Arabia

For Arabic Users, find a teacher/tutor in your City or country in the Middle East.

## Holooly Sources

Find the Source, Textbook, Solution Manual that you are looking for in 1 click.

## Holooly Help Desk

Need Help? We got you covered.

## Q. 10.1

After the account inventory at the company SVD, the following anomalies were established (Table 10.1). The cost before the account inventory of the raw materials B was 6945 lei (463 pieces at 15 lei per piece) and of the finished goods A was 1542 lei (10 pieces at 154.2 lei). It is estimated that the unitary selling expenses for the finished goods A could be 1 lei.
Required: Prepare the necessary adjustments at the end of the year.

Table 10.1 Anomalies established

 Inventories Current  price Surpluses Shortages Code Name Q Price Value Q Price Value 31 Raw materials A 10 46 460 32 Raw materials B 16 33 Finished goods A 155 34 Finished goods B 2 1750 3500

## Verified Solution

For raw materials A, there is a quantitative surplus of 460 lei to be recorded. The journal entry should be:

460 lei            Raw materials          =            Raw materials expenses          460 lei

For the finished goods B a quantitative shortage is recorded. The journal entry should be:

3500 lei       Differences in finished goods       =          Finished goods           3500 lei

For raw materials B, nothing should be recorded, because of the principle “the lower of carrying amount and net realizable value”. Thus, raw materials B will be disclosed in the balance sheet at the carrying amount (of 6945 lei).

The net realisable value for the finished goods A is to be computed.
Net realisable value for the finished goods A = Estimated selling price − Estimated selling expenses = 155 − 1 = 154 lei
The net realisable value is lower than the cost. In this case, an impairment should be recorded in accounting.
Impairment for the finished goods A = (154.2 − 154) * 10 pieces = 2 lei
The journal entry should be:

2 lei            Expenses with inventories impairments        =         Finished goods impairments               2 lei