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# INVENTORY VALUATION

PROBLEM # 01:
In pricing the gallons of petrol sold, service station Y follows the FIFO while service station Z
follows the LIFO method. On May 1, both had the same quantity in stock that is 6,000 gallons @ Rs. 26
per gallon. During the month each station received additional supplies of 6,000 gallons @ Rs. 28.50 per
gallon. Sales for each of these two stations during the month were 8,800 gallons at the rate of Rs. 29.50
per gallon.
Required:
Determine for each service station the profit earned during the month and the value of petrol in
stock at the close of the month. .

PROBLEM # 02:
Records of ABC Company shows the following data relative to commodity A:
2008 January 1 Opening inventory 1,000 Units @ 5.00
February 5 Purchases 2,000 Units @ 5.50
March 12 Purchases 3,000 Units @ 5.40
March 14 Sales 3,500 Units @ 10.00
April 12 Purchases 5,000 Units @ 6.00
May 14 Purchases 1,000 Units @ 7.00
June 30 Sales 4,000 Units @ 10.00

Required:
1. Compute the cost of ending inventory on June 30, under each of the following methods:
a. First-in-first-out (perpetual)
b. Last-in-first-out (periodic)
c. Moving average method
2. Prepare comparative income statement showing effect of three alternative valuations methods
on Gross Profit.

PROBLEM # 3:
The inventory record of Deluxe Trading Company for the month of November is as under:
Units Rate (Rs.)

## Nov. 1 Inventory 300 8

Nov. 8 Purchases 600 9
Nov. 15 Purchases 400 10
Nov. 25 Purchases 600 15
Total 700 units were sold during the month @ Rs. 18 per unit.
Required:
1. Calculate the units and cost of goods available for sale during November.
2. Calculate the number of units in ending inventory.
3. Calculate the value of ending inventory using periodic system of inventory valuation under each
of the following methods:
i. FIFO Method
ii. LIFO Method
iii. Weighted Average Method
4. Prepare an Income Statement for each of the above method; also mention which method of
inventory valuation gives you more profit?
PROBLEM # 4:
The selected information of a Company is as under:
Opening inventory Rs. 40,000
Purchases during the period 260,000
Sales for the period 230,000
Required:
Calculate the value of ending inventory for the following cases separately:
1. If Gross Profit is 20% of sales.
2. If Gross Profit is 20% of cost of goods sold.