We are here with you hands in hands to facilitate your learning & don't appreciate the idea of copying or replicating solutions. Read More>>

Looking For Something at vustudents.ning.com? Click Here to Search

www.bit.ly/vucodes

+ Link For Assignments, GDBs & Online Quizzes Solution

www.bit.ly/papersvu

+ Link For Past Papers, Solved MCQs, Short Notes & More


Dear Students! Share your Assignments / GDBs / Quizzes files as you receive in your LMS, So it can be discussed/solved timely. Add Discussion

How to Add New Discussion in Study Group ? Step By Step Guide Click Here.

Graded Discussion Board 02

Financial Accounting II (MGT401)

 

Topic: Valuation of Inventory

XYZ Ltd. is a manufacturer of readymade garments. Company’s accounts officer has suggested the management to change its accounting policy relating to inventory valuation method from weighted-average cost method (WAC) to first-in first-out (FIFO). It was considered that FIFO method reflects the usage of inventory more accurately in response of economic cycle.

Accounts officer has determined following differences, if company changes its inventory valuation method from weightage average method to first-in, first-out method.

 

Weighted Average Method (Rs.)

First-in, First-out  (Rs.)

Inventory at 1st January 2013

25,000

22,000

Inventory at 31st December 2013

36.000

30,000

Inventory at 31st December 2014

48,000

50,000

Inventory at 31st December 2015

64,000

70,000

 

Requirement:

a) On the basis of given data, you are required to mention that what will be the effect of change in inventory valuation method by filling the table given below.

  

Year

Particulars

Effect on Cost of Goods Sold

(simply mention that whether it will increase or decrease)

Effect on Profit

(simply mention that whether it will increase or decrease)

2013

Change in Opening Inventory

 

 

2013

Change in Closing Inventory

 

 

2014

Change in Closing Inventory

 

 

2015

Change in Closing Inventory

 

 

 

b) Justify your answer with logical arguments.

+ How to Follow the New Added Discussions at Your Mail Address?

+ How to Join Subject Study Groups & Get Helping Material?

+ How to become Top Reputation, Angels, Intellectual, Featured Members & Moderators?

+ VU Students Reserves The Right to Delete Your Profile, If?


See Your Saved Posts Timeline

Views: 3638

.

+ http://bit.ly/vucodes (Link for Assignments, GDBs & Online Quizzes Solution)

+ http://bit.ly/papersvu (Link for Past Papers, Solved MCQs, Short Notes & More)

+ Click Here to Search (Looking For something at vustudents.ning.com?)

+ Click Here To Join (Our facebook study Group)

Replies to This Discussion

Any answer to above

  

Year

Particulars

Effect on Cost of Goods Sold

(simply mention that whether it will increase or decrease)

Effect on Profit

(simply mention that whether it will increase or decrease)

2013

Change in Opening Inventory

 increase

 decreased

2013

Change in Closing Inventory

 decreased

  increase

2014

Change in Closing Inventory

 decreased

  increase

2015

Change in Closing Inventory

 decreased

  increase

1. When a company uses FIFO they are less likely to incur old and outdated inventory that can no longer be sold. Accountants have to write off what’s calledobsolete inventory after a certain amount of time goes by and the product is not used or sold. Because FIFO makes sure that the oldest items in stock are used or sold before they are deemed obsolete companies can save money.

2. Inflation happens, actually it’s pretty constantly happening. Let’s say you purchase a batch of dog food in May for $4,000. Come June when you are going to purchase another batch for your inventory, the prices have risen to over $6,000. Using FIFO, you would be selling off the batch from May before you sell off the batch from June, right? So now you can sell the batch from May for the current inflated market price which reduces the impact of inflation on the company.

kiya ye thek hy?

Because of the inflation effect the profit will increase after implication of FIFO. The CGS will decrease because of closing inventory having a larger value.

In the years 2014 and 2015 , the prices have fallen because the FIFO method is representing a larger amount than Weighted average method.

I think, the effect in the last two scenarios. i.e. 2014 and 2015 will be vice versa.

your opinion?

Year

Particulars

Effect on Cost of Goods Sold

(simply mention that whether it will increase or decrease)

Effect on Profit

(simply mention that whether it will increase or decrease)

2013

Change in Opening Inventory

 Increase

 Decrease

2013

Change in Closing Inventory

 Decrease

 Increase

2014

Change in Closing Inventory

 Increase

 Decrease

2015

Change in Closing Inventory

 Increase

Decrease

closing inventory of 2013 is the opening inventory of 2014 by compaing ...................all closing inventories are more than its opening inventory 

is it correct?

koi bataye ga kis ka correct hy????????????????????

Because of the inflation effect the profit will increase after implication of FIFO. The CGS will decrease because of closing inventory having a larger value.
esy b dekhyn to b mery wala shi hota hy.............

Aatika Nice work done but Azeem's justification are more appropriate.

2015

Change in Closing Inventory

  increase

decreased

RSS

Latest Activity

MUHAMMAD LUQMAN liked + M.Tariq Malik's discussion EDU301 Current Mid Term Papers Fall 2019 (14 to 26 December 2019) & All Solved Past Papers, Solved MCQs & Helping Material
27 minutes ago
+ M.Tariq Malik replied to + M.Tariq Malik's discussion CS314 Current Mid Term Papers Fall 2019 (14 to 26 December 2019) & All Solved Past Papers, Solved MCQs & Helping Material in the group CS314 Introduction to Cellular Networks
42 minutes ago
+ M.Tariq Malik liked + M.Tariq Malik's discussion CS314 Current Mid Term Papers Fall 2019 (14 to 26 December 2019) & All Solved Past Papers, Solved MCQs & Helping Material
43 minutes ago
+ M.Tariq Malik's 14 discussions were featured
43 minutes ago
+ M.Tariq Malik added a discussion to the group CS314 Introduction to Cellular Networks
46 minutes ago
+ M.Tariq Malik replied to + M.Tariq Malik's discussion CS315 Current Mid Term Papers Fall 2019 (14 to 26 December 2019) & All Solved Past Papers, Solved MCQs & Helping Material in the group CS315 Network Security
49 minutes ago
+ M.Tariq Malik replied to + M.Tariq Malik's discussion CS315 Current Mid Term Papers Fall 2019 (14 to 26 December 2019) & All Solved Past Papers, Solved MCQs & Helping Material in the group CS315 Network Security
53 minutes ago
+ M.Tariq Malik liked + M.Tariq Malik's discussion CS315 Current Mid Term Papers Fall 2019 (14 to 26 December 2019) & All Solved Past Papers, Solved MCQs & Helping Material
54 minutes ago
+ M.Tariq Malik added a discussion to the group CS315 Network Security
55 minutes ago
+ M.Tariq Malik replied to + M.Tariq Malik's discussion CS310 Current Mid Term Papers Fall 2019 (14 to 26 December 2019) & All Solved Past Papers, Solved MCQs & Helping Material in the group CS310 Open Source Web Application Development (PHP, PERL, CGI, Mysql)
59 minutes ago
+ M.Tariq Malik liked + M.Tariq Malik's discussion CS310 Current Mid Term Papers Fall 2019 (14 to 26 December 2019) & All Solved Past Papers, Solved MCQs & Helping Material
59 minutes ago
+ M.Tariq Malik added a discussion to the group CS310 Open Source Web Application Development (PHP, PERL, CGI, Mysql)
59 minutes ago

Today Top Members 

© 2019   Created by + M.Tariq Malik.   Powered by

Promote Us  |  Report an Issue  |  Privacy Policy  |  Terms of Service

.