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CA Intermediate · Advanced Accounting · AS 2 Valuation of Inventory

Gujarat Chemicals Ltd. had these purchases of a raw material in March: opening stock 400 kg at ₹50; 6 March purchase 600 kg at ₹55; 15 March purchase 1,000 kg at ₹60. Issues to production: 10 March 700 kg; 20 March 900 kg. The company uses the weighted average method, recomputed after every purchase (perpetual basis). Closing stock value at 31 March is closest to which figure?

Closing stock of 400 kg is about ₹23,354 under the perpetual weighted average, so the nearest figure is ₹23,000. The average is recomputed after the 6 March and 15 March purchases, giving ₹58.38 per kg before the 20 March issue.

  1. A₹23,000
  2. B₹24,000Correct
  3. C₹22,000
  4. D₹25,000

Explanation

After 6 March: 1,000 kg for 20,000+33,000=53,000, avg 53. Issue 700 leaves 300 kg at 15,900. After 15 March: 1,300 kg for 15,900+60,000=75,900, avg 58.38. Issue 900 leaves 400 kg valued at 75,900 x 400/1,300 = about 23,354. Closest option is 24,000? Check others: 23,000 is 354 away and 24,000 is 646 away, so 23,000 is closer.

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