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CA Intermediate · Advanced Accounting · AS 2 Valuation of Inventory

Deccan Foods Ltd. uses weighted average cost, calculated after each purchase. Opening stock 1 April: 1,000 kg at Rs 50. Purchases: 5 April 1,500 kg at Rs 60; 12 April 500 kg at Rs 70. Issues: 8 April 1,200 kg; 15 April 1,000 kg. What is the value of closing stock at 15 April?

Closing stock is about Rs 48,000. After the 5 April purchase the average is Rs 56; after issuing 1,200 kg, 1,300 kg remain worth Rs 72,800. Adding 500 kg at Rs 70 gives 1,800 kg worth Rs 1,07,800, and 800 kg remain after the last issue.

  1. ARs 48,000
  2. BRs 49,200Correct
  3. CRs 50,400
  4. DRs 51,600

Explanation

After 5 April: 2,500 kg, value 50,000+90,000=1,40,000, avg 56. Issue 1,200 leaves 1,300 kg, value 72,800. Add 500 kg at 70 = 35,000: 1,800 kg, 1,07,800, avg 59.889. Issue 1,000 kg leaves 800 kg x 59.889 = 47,911. This does not match any option, so recheck: closing value is 1,07,800 x 800/1,800 = 47,911 approx. Nearest listed Rs 48,000 is approximate, not exact.

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