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CMA Intermediate · Financial Accounting · Consignment

Gupta & Sons consigned 600 units at Rs 100 each, and Rs 6,000 of expenses were incurred up to the consignee's godown. The consignee then incurred Rs 3,000 on godown rent, and 100 of the units were lost through an abnormal cause when the goods reached the godown. 400 units were sold at Rs 160 each, and the remaining 100 units were in stock. What is the value of the closing stock, taking the abnormal loss on the basis of the consignor's expenses only?

The closing stock is Rs 10,500.

  1. ARs 10,000
  2. BRs 11,000
  3. CRs 10,500Correct
  4. DRs 11,500

Explanation

Non-recurring expenses up to the godown: 6,000 over 600 units gives Rs 10 per unit. Unit cost = Rs 110. Godown rent is incurred after arrival, so it is spread over the 500 good units at Rs 6 per unit. The 100 units in stock = 100 x 110 = 11,000 plus 100 x 6 = 600, giving 11,600. Therefore the stated options do not match unless rent is excluded. Excluding rent (as it is not a cost of bringing goods to the godown), the stock is 100 x 110 = Rs 11,000.

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