Question

To be kept a clear structure and organized paper work as accordingly to this guideline. To be included the names, IDs and versions assigned (46 points) Part 1: Prepare the Cash Elow Statement for DRU Company given the following data available or the year end 31st December 2018. 1. Net Income = $2,000,000 Depreciation expense on the machinery was $20,000 and $5,000 on vehicle. 2. 3. Accounts Receivable increased by 15,000 4. Inventories decreased by 30,000 5. Accounts Payable increased by 12,000 6. Salaries Payable decreased by 24,000 7. An equipment was purchased at 350,000. A long-term investment was sold at 45,000. 8. 9. Bonds payable of 60,000 were issued. 10. Cash Dividends of 48,000 were declared and paid. 11. Beginning Cash (2018) 44,000

Answer 1

Answer :

PART 1
	CASH FLOW STATEMENT
	OPENING CASH				44000
INFLOW-	NET INCOME			2,000,000
	INVENTORY			30,000
	ACCOUNTS PAYABLE			12,000
	INVESTMENT			45,000
	BONDS ISSUED			60,000	2,147,000
					2,191,000
OUTFLOW-	ACCOUNTS RECEIVABLE			15,000
	SALARY PAYABLE			24,000
	EQUIPMENT			350,000
	CASH DIVIDEND			48,000	437,000
	CLOSING CASH				1,754,000

PART 2	STOCK AND PURCHASES
(A)
	DATE	UNITS	COST/UNIT	COST OF GOODS SOLD
	1	2,000	6	12,000
	10	3,000	8	24,000
	15	1,500	10	15,000
	18	1,800	11	19,800
	25	1,000	14	14,000
		9,300	9.12	84,800
	SALES	5000 @ 28/ UNIT
	IF FIFO METHOD
	COST OF GOODS SOLS
	DATE	UNITS	COST/UNIT	COST OF GOODS SOLD
	1	2000	6	12,000
	10	3000	8	24,000
		5000		36,000
	INVENTORY
	DATE	UNITS	COST/UNIT	COST OF GOODS SOLD
	15	1500	10	15,000
	18	1800	11	19,800
	25	1000	14	14,000
		4,300		48,800
	IF LIFO METHOD
	COST OF GOODS SOLS
	DATE	UNITS	COST/UNIT	COST OF GOODS SOLD
	10	700	8	5,600
	15	1,500	10	15,000
	18	1,800	11	19,800
	25	1,000	14	14,000
		5,000		54,400
	INVENTORY
	DATE	UNITS	COST/UNIT	COST OF GOODS SOLD
	1	2,000	6	12,000
	10	2,300	8	18,400
		4,300		30,400
	IF AVERAGE COST METHOD
	COST OF GOODS SOLD(5000*9.12)			45,600
	INVENTORY(4300*9.12)			39,216

(B) Company should use average cost method

• As it gives clear and fair view of all transaction reduce the impact of higher or lower
• Valuation of profit and inventory on account of any unusual purchases
• As we can see in FIFO method, inventory is valuing very high as we have buy high cost item in end and in LIFO method, inventory us valuing very low as we have lower value purchase in beginning. Whereas we can see, inventory is optimum in average cost method.
• So, it will be better to start using this method only.

Part 3
	PRODUCTS		A	B	C
a	Selling price		700	650	800
b	Cost		480	250	350
c	Cost to complete		150	200	350
d	Cost to sell		100	150	120
a-c-d	NRV		450	300	330
LOWER OF	Unit / Value		450	250	330
NRV OR COST
	IF UNITS
	4300		1935000	1075000	1,419,000
	FINAL INVENTORY VALUE