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SARMAD ALI RAJA
VU ID MC100402861
ASSIGNMENT NO.1
"Financial Accounting II (MGT401)"
Question No. 1
On October 01, 2010 Model Company Limited, in the course of improvement and enhancement of its production facility, imported a plant from abroad having invoice value of Rs. 30 million for the production of its popular brand of electrical goods. A special trade discount of 25% was allowed by the vendor. Mr. Goodman, one of the directors, was assigned the duty of supervising the installation of the plant.
Other information is given below:
Expenses related to the import of the plant 1,620,000Site preparation 4,900,000
Operating losses before commercial production 400,000
Cost of test run & special staff training 730,000
Misc. Administrative Expenses 75,000
Interest paid to the vendor for deferred credit 200,000
Compensation by the vendor for capacity default 900,000
Estimated dismantling and other costs 1,150,000
Cost of damaged instruments 150,000
Required: Determine the cost of the plant to be recognized initially in the books of account.
SOLUTION
Add following items for the cost
Expenses related to the import of the plant 1,620,000
Site preparation 4,900,000
Cost of test run & special staff training 730,000
Interest paid to the vendor for deferred credit 200,000
Estimated dismantling and other costs 1,150,000
Cost of damaged instruments 150,000
That makes it = 4340000Now less following items
Compensation by the vendor for capacity default 900,000
4340000-900000
That makes it 3440000
The final cost that will be takes is 3440000
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Question No. 2
Furniture Point is the renowned name in the furniture market. They are dealing in five major wooden components of furniture i.e. sofas, bed sets, dressing tables, dining tables and wardrobes. At 31st December, 2010 the inventory in hand was as follows:
Items
Quantity(Units)
Cost per Unit Rs. (000)
NRV per Unit Rs.(000)
Sofa set
100
85
98
Dining Table
150
120
105
Bed
200
150
180
Dressing Table
400
60
55
Wardrobe
450
75
70
Required: Calculate the value of inventory as on December 31, 2010 under IAS 2 – Inventory. Also pass necessary adjusting entries in this regard, if required.
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SOLUTION
Items
Quantity(Units)
Cost per Unit Rs. (000)
NRV per Unit Rs.(000)
Sofa set
100
85
98
Dining Table
150
120
105
Bed
200
150
180
Dressing Table
400
60
55
Wardrobe
450
75
70
For dining table and wardrobe cost is more than NRV,, they will be recorded at the NRV..and following adjusting entries will be passed for them,, ( debit the p/l account with the difference in value, ,, and credit the stock in trade account…
for dining table:P/l Account 15 Rs debit
Stock in trade 15 Rs Credit
For the wardrobe:
PL account 5 Rs debit
Stock in trade 5 Rs credit
For dressing table:
Pl account 5 Rs debit
Stock in trade 5 Rs credit
Final amount will be:
85+105+150+55+70 = 465
On Wed, Nov 2, 2011 at 4:04 PM, mc100400616 Muhammad Irfan <mc100400616@vu.edu.pk> wrote:
mgt401 ka slution nahi hai ya accounting may kon si codeing use hoti hai
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