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
|31||Raw materials A||10||46||460|
|32||Raw materials B||16|
|33||Finished goods A||155|
|34||Finished goods B||2||1750||3500|
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