Inventory – Page 3

FA – L1 – Q64 – Correction of Errors

Prepare journal entries to correct errors in Mensah and Partners' trial balance, including irrecoverable debts and misposted transactions.

Question

The trial balance of Mensah and Partners did not agree as at 31 December 20X9, and the difference was carried to a suspense account. On scrutinising the books of account, the following types of errors were detected:
(i) Receivables include GH₵15,000 which are irrecoverable and need to be written off.
(ii) Goods invoiced at GH₵4,600 were returned by a customer. It was entered in the purchases book and posted from there to a creditor’s account as GH₵6,400.
(iii) A cheque of GH₵8,000 received from a customer was not posted to his ledger account. Moreover, the corresponding sales invoice for GH₵12,000 was incorrectly passed through the sales day book as GH₵2,000.
(iv) Sales include goods sold for cash amounting to GH₵25,000 on behalf of Mr Kwame. Mensah and Partners were entitled to a commission of 10% on the sales plus selling expenses, for which no adjustment was made. The related selling expenses amounted to GH₵1,500.
(v) An amount of GH₵3,800 owed by Y & Co. for goods supplied was to be adjusted against an amount of GH₵8,500 owed to Y & Co. No entry has been made in this regard.
(vi) A purchase of GH₵15,100 was entered in the purchase day book as GH₵1,500 and posted to the supplier’s account as GH₵5,100.
(vii) Goods invoiced at GH₵23,000 and returned by J K, a debtor, were entered in the purchase day book and posted therefrom to K J, a creditor, as GH₵32,000.
(viii) A supplier’s invoice for GH₵12,300 had been entered in the purchase day book on 28 December 20X9. However, the goods were received on 2 January 20Y0.
(ix) Some items of furniture which stood in the books at GH₵24,000 on 1 January 20X9 were disposed of on 30 June 20X9 in exchange for new furniture costing GH₵20,800. A net invoice of GH₵9,200 was passed through the purchase day book. Depreciation on furniture is charged at 10% on written down value.
(x) Mensah and Partners maintains an allowance of 5% of the gross amount of receivables.

Required:
Prepare journal entries to rectify the errors identified above.
(Narrative is not required.)

Answer

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Tags: Bad Debt, Depreciation, Error Correction, Inventory, Journal entries, Purchases, Receivables, Sales, suspense account, Trial Balance
Level: Level 1

Topic: Correction of Errors

FA – L1 – Q62 – Correction of Errors

Prepare journal entries to correct errors in Western Medical Supplies' trial balance as of June 30, 20X9.

Question

The trial balance of Western Medical Supplies showed a short credit of ZM₵6,264 as at June 30, 20X9. A suspense account was opened for the difference and the profit for the year was then calculated at ZM₵956,180.
The following errors and adjustments were discovered subsequently:
(i) An invoice of ZM₵3,700 was debited to purchases but the goods were received after year-end and were not included in the closing inventory.
(ii) Store equipment costing ZM₵8,100 and having a book value of ZM₵3,600 was sold for ZM₵2,500. Cash was debited and store equipment was credited. No other entries were made.
(iii) A cheque of ZM₵1,850 received from a customer was dishonoured on June 25, 20X9 but no entry was made in the books. Cash there against was received after year-end.
(iv) Purchase of office equipment costing ZM₵15,200 was entered in the purchases account. Depreciation on office equipment is provided at the rate of 10%.
(v) A purchase invoice of ZM₵197 was debited to the supplier account as ZM₵917.
(vi) Purchase returns book was under-casted by ZM₵650.
(vii) The opening balance of furniture account was brought forward as ZM₵18,300 instead of ZM₵13,800. Depreciation on furniture is provided at the rate of 10%.
(viii) A balance of ZM₵730 in the sales ledger is to be offset against a balance of ZM₵880 in the purchase ledger.

Required:
(a) Prepare journal entries to adjust the above items.

(b) Recalculate the net profit for the year.

Answer

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Tags: Depreciation, Error Correction, Inventory, Net profit, Non-current Assets, Payables, Profit Adjustment, Receivables, suspense account, Trial Balance
Level: Level 1

Topic: Correction of Errors

FA – L1 – Q45 – Inventory

Record inventory in ledger accounts and prepare trading account for Mensah and Associates for 20X9, adjusting for post-year-end transactions.

Question

Mensah and Associates carried out a physical count on 31 December 20X8 and finds GH₵10,000 of inventory in its warehouse.
During the year ended 31 December 20X9 the company makes GH₵70,000 of sales and buys GH₵58,000 of supplies.
The company carries out a physical count for the year ended 31 December 20X9 on 7 January 20X9 and finds GH₵15,000 worth of goods. In the six day intervening period there were sales of goods which had cost GH₵4,800 and deliveries inwards of goods costing GH₵8,000.

Required
Record inventory in the relevant ledger accounts and prepare the trading account for inclusion in the statement of profit or loss for the year ended 31 December 20X9.

Answer

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Tags: Closing Inventory, Cost of Sales, Financial Statements, Inventory, Ledger accounts, Physical Count, Purchases, Sales, Sole Trader, Trading Account
Level: Level 1

Topic: Inventory

FA – L1 – Q44 – Inventory Valuation

Calculate inventory value for Bles at 31 Dec 20X9 using lower of cost or NRV.

Question

t 31 December 20X9 Bles had the following items of inventory:

Product	Quantity	Total cost GH₵	Realisable value GH₵	Estimated cost of realisation GH₵
ABC	20	80	200	20
DEF	10	150	120	10
GHI	6	6	7	2
JKL	12	36	12	1

Required
What amount of inventory should be presented in the statement of financial position of Bles at 31 December 20X9.

Answer

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Tags: Cost, Financial Position, Inventory, Net Realisable Value, Valuation
Level: Level 1

Topic: Inventory

FA – L1 – Q43 – Inventory

Write up inventory, purchases, and revenue accounts for two years for a sole trader.

Question

Kofi started business on 1 January 20X8. At the end of his first year of trading he had closing inventory of GH¢5,000. During 20X9 he traded continuously and at 31 December 20X9 he had inventory amounting to GH¢7,500.
Sales for 20X8 and 20X9 were GH¢120,000 and GH¢155,000 respectively and purchases were GH¢75,000 and GH¢110,000 respectively.

Required
(a) Write up the inventory account, purchases account, and revenue account for the two years.

(b) Prepare the trading account for EACH of the two years.

Answer

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Tags: Financial Statements, Inventory, Ledger accounts, Purchases, Revenue, Sole Trader, Trading Account
Level: Level 1

Topic: Inventory

FA – L1 – Q41 – Preparing financial statements of a sole trader

Prepare Kweku's statement of profit or loss and financial position for 20X9 using trial balance and adjustments.

Question

The following list of account balances was extracted from the books of Kweku at 30 April 20X9.

	Dr GH¢(000)	Cr GH¢(000)
Revenue		18,955
Purchases	12,556
Inventory 1 May 20X8	3,776
Salaries and wages	2,447
Motor expenses	664
Rent	456
Rates	120
Insurance	146
Packing expenses	276
Lighting and heating expenses	665
Sundry expenses	115
Motor vehicles	2,400
Fixtures and fittings	600
Trade receivables	4,577
Trade payables		3,045
Cash at bank	3,876
Cash in hand	120
Drawings	2,050
Capital		12,844
	34,844	34,844

Notes at 30 April:
(1) Expenses which have been prepaid – rates GH¢20,000; Insurance GH¢35,000.
(2) Expenses which are owing – motor expenses GH¢56,000; rent GH¢24,000; sundry expenses GH¢26,000.
(3) Inventory GH¢4,998,000.

Required:
From the list of balances and the notes, prepare Kweku’s statement of profit or loss for the year ended 30 April 20X9 and a statement of financial position at that date.

Answer

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Tags: Accruals, Adjustments, Financial Statements, Inventory, Ledger accounts, Prepayments, Profit or Loss, Sole Trader, Statement of Financial Position, Trial Balance
Level: Level 1

Topic: Preparing financial statements of a sole trader

FA – L1 – Q39 – Preparing financial statements of a sole trader

Prepare a trial balance, statement of profit or loss, and statement of financial position for an antique dealer based on given balances and transactions.

Question

JOHNNY
Johnny is in business as an antique dealer. The trial balance of his business at 1 January 20X9 was as follows.

	Dr GH₵(000)	Cr GH₵(000)
Capital		5,000
Cash	4,200
Motor van	600
Trade payable – A		200
Trade receivable – B	300
Rates prepaid	100
	5,200	5,200

Cash transactions during the period to 31 March 20X9 were

	GH₵(000)
Purchases	2,000
Revenue	3,000
Drawings	500
Motor running expenses	350
Rates	250

At 31 March inventory was GH₵700,000 and rates paid in advance amounted to GH₵150,000.

Required
(a) Prepare the trial balance at 31 March 20X9.

(b) Prepare the statement of profit or loss for the period to 31 March 20X9 and a statement of financial position at that date.

Answer

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Tags: Cash Transactions, Financial Statements, Inventory, Prepayments, Profit or Loss, Sole Trader, Statement of Financial Position, Trial Balance
Level: Level 1

Topic: Preparing financial statements of a sole trader

MA – L2 – Q16 – Budgetary control

Prepare a budgeted profit or loss statement for Kofi Limited for Q1, focusing on sales, inventory, and expenses.

Question

Kofi Limited retails fertilizer to farmers in Ghana. The company has approached its Bankers to provide funding for next year’s operations and a three-month master budget has been requested for review by the bankers.
You have been approached by the management as a consultant to prepare the 1st quarter budget for the banker’s consideration for its next year’s operations.
End of Accounting year December 20X9

	GH¢
Debtors	23,000
Bank balance	55,000
Non-current asset at cost	698,000
Provision for depreciation balance	98,000
Creditors Balance	48,000
Operating expenses for the month December	60,000
Sales for the month of December 20X9	400,000
December Ending inventory	20,000
Retained earnings	120,000

The following additional information was also provided to assist your work:
(i) Depreciation is provided at the rate of 5% on cost of non-current assets.
(ii) Closing inventory is expected to increase by GH¢2,000 in January from December levels. This is expected to increase by the same figure in February from the projected figure in January. It is expected that in March closing inventory is desired to be GH¢26,000.
(iii) The company makes a profit of 25% on its sales.
(iv) Operating expenses are expected to increase by 10% from that of December, and this is projected to increase at the same growth rate to March.
(v) Sales are projected to grow by 15% from December until March.
(vi) The Debtors figure is desired to be proportional to the sales values.
(vii) Creditors value for the three months are expected to be as follows: January – GH¢50,000; February – GH¢46,000; and in March – GH¢52,000.

You are required as a consultant for Kofi Company Limited to prepare for their Bankers:
(a) The budgeted statement of profit or loss for the three months.

(b) The budgeted statement of financial position for the three months.

Answer

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Tags: Budgeting, Cash Balance, Creditors, Debtors, Depreciation, Financial Planning, Financial Position, Inventory, Non-current Assets, Retained Earnings
Level: Level 2

Topic: Budgetary Control, Cash budgets and master budgets

FA – L1 – Q13 – Preparing financial statements of a sole trader

Prepare a statement of profit or loss and financial position for Worthe's business for the year ended 30 June 20X9 using the given trial balance and inventory data.

Question

The following is a trial balance for Worthe after his first year’s trading. You are required to prepare a statement of profit or loss for the year ended 30 June 20X9 and a statement of financial position as at that date.

Worthe – Trial balance as at 30 June 20X9

	DR GH₵(000)	CR GH₵(000)
Sales		28,794
Purchases	23,803
Rent	854
Lighting and heating expenses	422
Salaries and wages	3,164
Insurance	105
Land and buildings	50,000
Fixtures and fittings	1,000
Receivables	3,166
Sundry expenses	506
Payables		1,206
Cash at bank	3,847
Drawings	2,400
Motor vans	5,500
Motor running expenses	1,133
Capital		65,900
Total	95,900	95,900

Inventory at 30 June 20X9 was GH₵4,166,000.

Answer

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Tags: Capital, Drawings, Expenses, Financial Statements, Inventory, Non-current Assets, Profit or Loss, Sole Trader, Statement of Financial Position, Trial Balance
Level: Level 1

Topic: Preparing financial statements of a sole trader

FA – L1 – Q12 – Double entry bookkeeping

Record Leah's March 20X9 transactions in main ledger T accounts and prepare a trial balance as at 31 March 20X9.

Question

Enter the following transactions in the main ledger accounts of Leah, and extract a trial balance as at 31 March 20X9.
Assume that all receipts and payments are by cheque unless told otherwise.

March 20X9

Date	Transaction
1	Started business with GH₵80,000 in the bank
2	Bought goods on credit from: K&H Supplies GH₵7,600; Hatton Traders GH₵2,700; Tobias Traders GH₵5,600
5	Cash sales GH₵8,700. The cash was kept in a safe in Leah’s office.
6	Paid wages GH₵1,400 by cheque.
7	Sold goods on credit to: Elliott Enterprises GH₵3,500; L. Lang GH₵4,200; Carter Leisure GH₵7,200
9	Bought goods for cash GH₵4,600 using cash from Leah’s safe.
10	Bought goods on credit from: K&H Supplies GH₵5,700; Tobias Traders GH₵9,800
12	Paid wages GH₵1,400 by cheque.
13	Sold goods on credit to: L. Lang GH₵3,200; Carter Leisure GH₵2,300
15	Bought shop fixtures on credit from Betta Fittings GH₵5,000
17	Paid K&H Supplies GH₵8,400
18	Goods returned to Tobias Traders GH₵2,000
21	Paid Betta Fittings GH₵5,000
24	Payment received from Carter Leisure GH₵9,500
27	Goods returned to K&H Supplies GH₵2,400
30	Royal Bank provides a loan of GH₵6,000
31	Bought a motor van, paying by cheque GH₵40,000

Answer

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Tags: Capital, Double Entry, Inventory, Ledger accounts, Non-current Assets, Payables, Purchases, Receivables, Sales, T accounts, Trial Balance
Level: Level 1

Topic: Double entry bookkeeping

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FA – L1 – Q64 – Correction of Errors

Prepare journal entries to correct errors in Mensah and Partners' trial balance, including irrecoverable debts and misposted transactions.

FA – L1 – Q62 – Correction of Errors

Prepare journal entries to correct errors in Western Medical Supplies' trial balance as of June 30, 20X9.

FA – L1 – Q45 – Inventory

Record inventory in ledger accounts and prepare trading account for Mensah and Associates for 20X9, adjusting for post-year-end transactions.

FA – L1 – Q44 – Inventory Valuation

Calculate inventory value for Bles at 31 Dec 20X9 using lower of cost or NRV.

FA – L1 – Q43 – Inventory

Write up inventory, purchases, and revenue accounts for two years for a sole trader.

FA – L1 – Q41 – Preparing financial statements of a sole trader

Prepare Kweku's statement of profit or loss and financial position for 20X9 using trial balance and adjustments.

FA – L1 – Q39 – Preparing financial statements of a sole trader

Prepare a trial balance, statement of profit or loss, and statement of financial position for an antique dealer based on given balances and transactions.

MA – L2 – Q16 – Budgetary control

Prepare a budgeted profit or loss statement for Kofi Limited for Q1, focusing on sales, inventory, and expenses.

FA – L1 – Q13 – Preparing financial statements of a sole trader

Prepare a statement of profit or loss and financial position for Worthe's business for the year ended 30 June 20X9 using the given trial balance and inventory data.

FA – L1 – Q12 – Double entry bookkeeping

Record Leah's March 20X9 transactions in main ledger T accounts and prepare a trial balance as at 31 March 20X9.

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Prepare journal entries to correct errors in Mensah and Partners' trial balance, including irrecoverable debts and misposted transactions.

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Prepare journal entries to correct errors in Western Medical Supplies' trial balance as of June 30, 20X9.

You're reporting an error for "FA – L1 – Q62 – Correction of Errors"

Record inventory in ledger accounts and prepare trading account for Mensah and Associates for 20X9, adjusting for post-year-end transactions.

You're reporting an error for "FA – L1 – Q45 – Inventory"

Calculate inventory value for Bles at 31 Dec 20X9 using lower of cost or NRV.

You're reporting an error for "FA – L1 – Q44 – Inventory Valuation"

Write up inventory, purchases, and revenue accounts for two years for a sole trader.

You're reporting an error for "FA – L1 – Q43 – Inventory"

Prepare Kweku's statement of profit or loss and financial position for 20X9 using trial balance and adjustments.

You're reporting an error for "FA – L1 – Q41 – Preparing financial statements of a sole trader"

Prepare a trial balance, statement of profit or loss, and statement of financial position for an antique dealer based on given balances and transactions.

You're reporting an error for "FA – L1 – Q39 – Preparing financial statements of a sole trader"

Prepare a budgeted profit or loss statement for Kofi Limited for Q1, focusing on sales, inventory, and expenses.

You're reporting an error for "MA – L2 – Q16 – Budgetary control"

Prepare a statement of profit or loss and financial position for Worthe's business for the year ended 30 June 20X9 using the given trial balance and inventory data.

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Record Leah's March 20X9 transactions in main ledger T accounts and prepare a trial balance as at 31 March 20X9.

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