KK Jewellers bought 1 kg of gold during the year at the rate of Rs.40,000 per ten grams. At the end of the year, half of the gold is still unsold .The current market price of the gold is Rs.48,000 per ten grams . At what value the gold inventory should be shown in the financial statements of KK Jewellers? What will be your answer if the current market price of gold is Rs.39,000 per ten grams? State the principle involved.
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Answered by
0
Answer:
61200000 is it correct
plz mark it Brantley
Answered by
1
Answer:
- Value of Inventory is Rs.40000*50 lots(500grams/10)= Rs.2000000
- Value of Inventory is Rs.39000*50 lots(500grams/10)= Rs.1950000
Explanation:
Given: KK Jewellers
- Purchased Gold - 1Kg @40000 per ten grams
- Inventory -500Grams
- Current market value is 48000 Per ten grams
Principle Involved:
As per the accounting standard, valuation of closing inventory must be considered as lower of the actual original cost or market value.
Situation 1:
As per the above principle, Inventory is to be valued at cost or market value whichever is lower i.e. RS. 40000 (Rs. 40000 or Rs. 48000)
Value of Inventory is Rs.40000*50 lots(500grams/10)= Rs.2000000
Situation 2:
As per the above principle, Inventory is to be valued at cost or market value whichever is lower i.e. Rs.39000 (Rs. 40000 or Rs. 39000)
Value of Inventory is Rs.39000*50 lots(500grams/10)= Rs.1950000
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