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Chapter 10

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