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Stock Valuation: Illustration: 1

The document provides information and examples on calculating stock valuation using different inventory costing methods. Specifically, it contains: 1) An example of calculating closing stock value as of August 31, 2003 for a company using FIFO and weighted average costing methods, with receipts of materials on various dates at different costs. 2) Another example calculating cost of goods sold and closing inventory value from given purchase and sales data using FIFO and weighted average costing. 3) A third example providing partial transaction details for calculating stock valuation of spare parts for a company.

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Kanak Thacker
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298 views5 pages

Stock Valuation: Illustration: 1

The document provides information and examples on calculating stock valuation using different inventory costing methods. Specifically, it contains: 1) An example of calculating closing stock value as of August 31, 2003 for a company using FIFO and weighted average costing methods, with receipts of materials on various dates at different costs. 2) Another example calculating cost of goods sold and closing inventory value from given purchase and sales data using FIFO and weighted average costing. 3) A third example providing partial transaction details for calculating stock valuation of spare parts for a company.

Uploaded by

Kanak Thacker
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Stock Valuation

Illustration: 1
Sumit Ltd. has purchased and issued the materials in the following order:

Month Date Particulars Units Cost Per Unit Rs.


August, 2003 01 Purchases 300 3
04 Purchases 600 4
06 Issues 500 -
10 Purchases 700 4
15 Issues 800 -
20 Purchases 300 5
23 Issues 100 -
Ascertain the quantity of closing stock as on 31 st August, 2003 and state what will be the value under
the following methods.
(1 ) First in first out method. (2 ) Weighted Average method.

Solution:
(A) FIFO
Date Receipts Issues Balance
Units Price Amount Units Price Amount Units Price Value
1-8-2003 Opng. - - - - - Nil Nil Nil
1-8-2003 300 3.00 900 - - - 300 3.00 900
4-8-2003 600 4.00 2,400 - - - 300 3.00 900
600 4.00 2,400
6-8-2003 - - - 300 3.00 900 400 4.00 1,600
200 4.00 800
10-8-2003 700 4.00 2,800 - - - 400 4.00 1,600
700 4.00 2,800
15-8-2003 - - - 400 4.00 1,600 300 4.00 1,200
400 4.00 1,600
20-8-2003 300 5.00 1,500 - - - 300 4.00 1,200
300 5.00 1,500
23-8-2003 - - - 100 4.00 400 200 4.00 800
300 5.00 1,500

Therefore, the value of stock as on 31-8-2003 : Rs. 2,300


Stock Valuation

(B) Weighted Average (Perpetual Inventory System)

STOCK LEDGER
Date Receipts Issues Balance
Units Price Amount Units Wt. Avg. Amount Units Value
rate
01-8-2003 Opng. - - - - - Nil Nil
01-8-2003 300 3.00 900 - - - 300 900
04-8-2003 600 4.00 2,400 - - - 900 3,300
06-8-2003 - - - 500 3.67 1,835 400 1,465
10-8-2003 700 4.00 2,800 - - - 1,100 4,265
15-8-2003 - - - 800 3.88 3,104 300 1,161
20-8-2003 300 5.00 1,500 - - - 600 2,661
23-8-2003 - - - 100 4.44 444 500 2,217

Working Notes:
(1) Issue on August 6 is valued at Rs. 3.67 which is the weighted average rate, arrived at as follows:
900 + 2,400 = 3,300 = 3.666 r/o 3.67
300 + 600 900

(2) Issue on August 15 is valued at Rs. 3.88 per kg. which is the weighted average rate arrived at as
follows:
1,465 + 2,800 = 4,265 = 3.877 r/o 3.88
400 + 700 1,100

(3) Issue on August 23 is valued at Rs. 4.44 per kg. which is the weighted average rate arrived at as
follows:
1,161 + 1,500 = 2,661 = 4.435 r/o 4.44
300 + 300 600
Therefore, the value of stock as on 31-8-2003 : 500 units @ Rs. 4.44 = Rs. 2,217

Illustration: 2
Calculate by FIFO method and weighted Average Cost of inventory valuation, the cost of goods sold and
value of closing inventory from the following data:

Date Transactions Units Price per unit


01-01-2003 Opening stock 1,500 20
05-02-2003 Purchases 750 25
10-03-2003 Purchases 600 22
15-03-2003 Sales 1,800 30
12-04-2003 Sales 750 31
16-05-2003 Purchases 600 25
25-06-2003 Sales 750 32
Stock Valuation

Solution:
(1 ) First In First Out (FIFO)
Stores Ledger Account

Date Purchases Issues Balance


Units Rate Rs. Units Rate Rs. Units Rate Rs.
Rs. Rs. Rs.
01-01-2003 - - - - - - 1,500 20 30,000
05-02-2003 750 25 18,750 - - - 1,500 20 30,000
750 25 18,750
10-03-2003 600 22 13,200 - - - 1,500 20 30,000
750 25 18,750
600 22 13,200
15-03-2003 - - - 1,500 20 30,000 450 25 11,250
300 25 7,500 600 22 13,200
12-04-2003 - - - 450 25 11,250 300 22 6,600
300 22 6,600
16-05-2003 600 25 15,000 - - - 300 22 6,600
600 25 15,000
25-06-2003 - - - 300 22 6,600 150 25 3,750
450 25 11,250
Total 46,950 73,200 3,750

Cost of goods sold = Opening stock + Purchases - Closing Stock = 30,000 + 46,950 3,750 = Rs. 73,200
Value of closing inventory Rs. 3,750

(2) Weighted Average Cost

Date Purchases Issues Balance


Units Rate Rs. Rs. Units W.A.R. Rs. Units Rs.
Rs.
01-01-2003 - - - - - - 1,500 30,000
05-02-2003 750 25 18,750 - - - 2,250 48,750
10-03-2003 600 22 13,200 - - - 2,850 61,950
15-03-2003 - - - 1,800 21.74 39,126 1,050 22,824
12-04-2003 - - - 750 21.74 16,303 300 6,521
16-05-2003 600 25 15,000 - - - 900 21,521
25-06-2003 - - - 750 23.91 17,934 150 3,587
Total 46,950 73,363 3,587

Cost of goods sold Rs. 73,363.


Value of closing inventory = Opening stock + Purchases cost of Goods Sold
= Rs. 30,000 + Rs. 46,950 Rs. 73,363 = Rs. 3,587.
Stock Valuation

Illustration: 3
The following are the details of a spare part of Sriram Mills:

01-01-2004 Opening Stock Nil


01-01-2004 Purchases 100 units @ Rs. 30 per unit
15-01-2004 Issued for Consumption 50 units
01-02-2004 Purchases 200 units @ Rs. 40 per unit
15-02-2004 Issued for Consumption 100 units
20-02-2004 Issued for Consumption 100 units
01-03-2004 Purchases 150 units @ Rs. 50 per unit
15-03-2004 Issued for Consumption 100 units
Find out the value of stock as on 31-03-2004 if the company follows : (a) First In First Out basis:
(b) Weighted Average basis.

Solution :
(A) FIFO Method :

STOCK LEDGER
Date Receipts Issues Balance
Units Price Amount Units Price Amount Units Price Value
01-1-2004 Opng. - - - - - Nil Nil Nil
01-1-2004 100 30.00 3,000 - - - 100 30.00 3,000
15-1-2004 - - - 50 30.00 1,500 50 30.00 1,500
01-2-2004 200 40.00 8,000 - - - 50 30.00 1,500
200 40.00 8,000
15-2-2004 - - - 50 30.00 1,500 150 40.00 6,000
50 40.00 2,000
20-2-2004 - - - 100 40.00 4,000 50 40.00 2,000
01-3-2004 150 50.00 7,500 - - - 50 40.00 2,000
150 50.00 7,500
15-3-2004 - - - 50 40.00 2,000 100 50.00 5,000
50 50.00 2,500

Therefore, the value of stock of as on 31-3-2004 : 100 units @ Rs. 50.00 = Rs. 5,000.

(B) Weighted Average (Perpetual System of Inventory):

STOCK LEDGER
Date Receipts Issues Balance
Units Price Amount Units Wt.Avg. Amount Units Value
Rate
01-1-2004 Opng. - - - - - Nil Nil
01-1-2004 100 30.00 3,000 - - - 100 3,000
15-1-2004 - - - 50 30.00 1,500 50 1,500
01-2-2004 200 40.00 8,000 - - - 250 9,500
Stock Valuation

15-2-2004 - - - 100 38.00 3,800 150 5,700


20-2-2004 - - - 100 38.00 3,800 50 1,900
01-3-2004 150 50.00 7,500 - - - 200 9,400
15-3-2004 - - - 100 47.00 4,700 100 4,700

Therefore, the value of stock of as on 31-3-2004 : 100 units @ Rs. 47.00 = Rs. 4,700.

Working Notes:
(1) Weighted Average Rate on 15-2-2004 = 1,500 + 8,000 = Rs. 38
250

(2) Weighted Average Rate on 15-3-2004 = 1,900 + 7,500 = Rs. 47


200

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