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Questions AS2 and AS3

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18 views5 pages

Questions AS2 and AS3

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learner.18102002
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© © All Rights Reserved
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AS 2: Valuation of Inventories

1. The company deals in three products, A, B and C, which are neither


similar nor interchangeable. At the time of closing of its account for the
year 2016-17, the Historical Cost and Net Realisable Value of the items of
closing stock are determined as follows:
Items Historical Cost Net Realisable
(Rs. in lakhs) Value (Rs. in lakhs)
A 40 28
B 32 32
C 16 24

What will be the value of closing stock?


2. X Co. Limited purchased goods at the cost of Rs. 40 lakhs in October,
2016. Till March, 2017, 75% of the stocks were sold. The company wants
to disclose closing stock at Rs. 10 lakhs. The expected sale value is Rs. 11
lakhs and a commission at 10% on sale is payable to the agent. Advise,
what is the correct closing stock to be disclosed as at 31.3.2017.

3. In a production process, normal waste is 5% of input. 5,000 MT of input


were put in process resulting in wastage of 300 MT. Cost per MT of input
is Rs. 1,000. The entire quantity of waste is on stock at the year end. State
with reference to Accounting Standard, how will you value the
inventories in this case?

4. You are required to value the inventory per kg of finished goods


consisting of:
Rs. per
kg.
Material cost 200
Direct labour 40
Direct variable overhead 20

Fixed production charges for the year on normal working capacity of 2 lakh
kgs is Rs. 20 lakhs. 4,000 kgs of finished goods are in stock at the year end.

CA Anand Teertha G 1
5.
Particulars Kg. Rs.
Opening Inventory Finished Goods 1,000 25,000
Raw Materials 1,100 11,000
Purchases 10,000 1,00,000
Labour 76,500
Overheads (Fixed) 75,000
Sales 10,000 2,80,000
Closing Inventory Raw Materials 900
Finished Goods 1,200

The expected production for the year was 15,000 kg of the finished
product. Due to fall in market demand the sales price for the finished
goods was Rs. 20 per kg and the replacement cost for the raw material
was Rs. 9.50 per kg on the closing day. You are required to calculate the
closing inventory as on that date.

6. A Limited is engaged in manufacturing of Chemical Y for which Raw


Material X is required. The company provides you following information
for the year ended 31st March, 2017.

Rs. Per
unit
Raw Material X
Cost price 380
Unloading Charges 20
Freight Inward 40
Replacement cost 300
Chemical Y
Material consumed 440
Direct Labour 120
Variable Overheads 80
Additional Information:
• Total fixed overhead for the year was Rs. 4,00,000 on normal
capacity of 20,000 units.

CA Anand Teertha G 2
• Closing balance of Raw Material X was 1,000 units and Chemical
Y was Rs. 2,400 units.

You are required to calculate the total value of closing stock of Raw
Material X and Chemical Y according to AS 2, when
(i) Net realizable value of Chemical Y is Rs. 800 per unit
(ii) Net realizable value of Chemical Y is Rs. 600 per unit

7. On 31st March 2017, a business firm finds that cost of a partly finished
unit on that date is Rs. 530. The unit can be finished in 2017-18 by an
additional expenditure of Rs. 310. The finished unit can be sold for Rs.
750 subject to payment of 4% brokerage on selling price. The firm seeks
your advice regarding the amount at which the unfinished unit should
be valued as at 31st March, 2017 for preparation of final accounts.
Assume that the partly finished unit cannot be sold in semi finished form
and its NRV is zero without processing it further.

8. Wooden Plywood Limited has a normal wastage of 5% in the production


process. During the year 2017-18, the Company used 16,000 MT of Raw
material costing Rs. 190 per MT. At the end of the year, 950 MT of wastage
was in stock. The accountant wants to know how this wastage is to be
treated in the books.

You are required to :


1. Calculate the amount of abnormal loss.
2. Explain the treatment of normal loss and abnormal loss. [In the context
of AS-2 (Revised)]

9. Mr. Rakshit gives the following information relating to items forming


part of inventory as on 31st March, 2019. His factory produces product X
using raw material A.

i. 800 units of raw material A (purchased @ Rs. 140 per unit).


Replacement cost of raw material A as on 31st March, 2019 is Rs.
190 per unit.
ii. 650 units of partly finished goods in the process of producing X
and cost incurred till date Rs. 310 per unit. These units can be
finished next year by incurring additional cost of Rs. 50 per unit.

CA Anand Teertha G 3
iii. 1,800 units of finished product X and total cost incurred Rs. 360 per
unit.

Expected selling price of product X is Rs. 350 per unit.

In the context of AS-2, determine how each item of inventory will be


valued as on 31st March, 2019. Also, calculate the value of total inventory
as on 31st March, 2019.

AS 3: Cash Flow Statement

1. Classify the following activities as (1) Operating Activities, (2) Investing


Activities, (3) Financing Activities (4) Cash Equivalents.

a. Proceeds from long-term borrowings.


b. Proceeds from Trade receivables.
c. Trading Commission received.
d. Redemption of Preference Shares.
e. Proceeds from sale of investment
f. Interim Dividend paid on equity shares.
g. Interest received on debentures held as investment.
h. Dividend received on shares held as investments.
i. Rent received on property held as investment.
j. Dividend paid on Preference shares.
k. Marketable Securities

CA Anand Teertha G 4
2. Prepare cash flow from investing activities as per AS 3 of M/s Subham
Creative Limited for year ended 31.3.2019.

Particulars Amount
(Rs.)
Machinery acquired by issue of shares at face value 2,00,000
Claim received for loss of machinery in earthquake 55,000
Unsecured loans given to associates 5,00,000
Interest on loan received from associate company 70,000
Pre-acquisition dividend received on investment made 52,600
Debenture interest paid 1,45,200
Term loan repaid 4,50,000
Interest received on investment (TDS of Rs. 8,200 was 73,800
deducted on the above interest)
Purchased debentures of X Ltd., on. 1st December, 2018 3,00,000
which are redeemable within 3 months
Book value of plant & machinery sold (loss incurred Rs. 90,000
9,600)

CA Anand Teertha G 5

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