Question

In: Finance

PLS TELL ME HOW TO DO THIS A bottle shop purchased the following items from their...

PLS TELL ME HOW TO DO THIS

A bottle shop purchased the following items from their suppliers: 1,200 bottles of white wine for $26.51 each; 1,380 bottles of red wine for $18.6 each; 3,550 cartons of beer for $23.23 each; 942 cartons of cider for $27.5 each; and 134 bottles of vodka for $57.06 each.

Sales for the month were: 915 bottles of white wine; 825 bottles of red win; 2,235 cartons of beer; 517 cartons of cider; and 87 bottles of vodka. The selling price was a markup of 61.04% on cost.

What was the value of the Closing Inventory for the month?

Enter your answer as a plain number to two decimal places only. Do not use "$" of "," or any other non-numerals in your answer, except the "." decimal point.

Solutions

Expert Solution

Step 1:

The following table shows the purchases:

Particulars Purchases
Number of bottles (A) Cost per bottle (B) Total Cost (A) * (B)
White wine      1,200.00              26.51      31,812.00
Red wine      1,380.00              18.60      25,668.00
Beer      3,550.00              23.23      82,466.50
Cider         942.00              27.50      25,905.00
Vodka         134.00              57.06        7,646.04
Total    173,497.54

Step 2:

The following table shows the sales:

Particulars Sales
Number of bottles (A) Sale Price per bottle (B) Total Sales (A) * (B)
White wine          915.00          42.69      39,062.91
Red wine          825.00          29.95      24,711.59
Beer       2,235.00          37.41      83,610.44
Cider          517.00          44.29      22,895.86
Vodka             87.00          91.89        7,994.38
Total    178,275.18

Step 3:

The following table shows the closing inventory:

Particulars No. of Bottles
Purchased (A) Sold (B) Closing Inventory (A) - (B)
White wine      1,200.00           915.00            285.00
Red wine      1,380.00           825.00            555.00
Beer      3,550.00        2,235.00        1,315.00
Cider         942.00           517.00            425.00
Vodka         134.00              87.00              47.00
Total      7,206.00        4,579.00        2,627.00

Step 4:

Inventory are valued at “Cost or Net Realizable Value (NRV)" whichever is lower. Net Realisable Value is the same as Sale Price. In normal situation, sale price will always be greater than cost price (purchase price). However, in some rare situations, sale price (like in case of obsolete or very old inventory items) may be lesser than the purchase price. In this case, since sale price is higher than purchase price. Thus the inventory is to be valued at the purchase price as follows:

Particulars Inventory valued at purchase price
White wine                 26.51
Red wine                 18.60
Beer                 23.23
Cider                 27.50
Vodka                 57.06

Step 5:

Closing Value of Inventory = closing inventory as per Step 3 * Value as per step 4. Refer the following table:

Particulars No. of Bottles
Purchased (A) Sold (B) Closing Inventory (C) = (A) - (B) Purchase price per bottle (D) Closing Inventory Value (C) * (D)
White wine           1,200.00           915.00            285.00              26.51        7,555.35
Red wine           1,380.00           825.00            555.00              18.60      10,323.00
Beer           3,550.00        2,235.00        1,315.00              23.23      30,547.45
Cider               942.00           517.00            425.00              27.50      11,687.50
Vodka               134.00              87.00              47.00              57.06        2,681.82
Total      62,795.12

Thus the total closing inventory value is 62,795.12


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