Question

PART 3 Woodcraft Ltd manufactures and sell rated for TOT VAT purposes. At 30/6/20% closing stock was valued at 297.240. lee Future. It is standard their draft accounts showed that During the course of the audit the following was discovered: 1 The closing stock includes 3 desks which are below specification standards. The total cost of producing these denke was ei, 700. Woodcraft Ltd proposes to sell the desks at €500 each. 2 Some completed furniture which was included in closing stock at a cost of e3,800 was partially damaged by damp. An estimated €350 will have to be spent to restore the furniture to its saleable condition at which time it is expected that it can be sold for €4,200. 3 Free samples of office chairs sent to Woodcraft Ltd by a supplier were included in closing stock at their catalogue price of €650. 4 Raw materials costing €2,200 plus 20% VAT, were dispatched by a supplier on 29/6/20xo. As the materials were not received until 2/7/20xo they were not included in closing stock. 5 Furniture which cost €2,900 to manufacture and which had a selling price of €3, 450 was sent to a customer on a sale or return basis. This furniture was included in closing stock at €3, 450. The customer has not yet decided whether or not to keep the furniture. 6 In June the company spent €33,000 (inclusive of 10% VAT) on furniture from a bankrupt manufacturer. This stock is still in the bankrupt manufacturer's warehouse and therefore it has not been included in closing stock. To generate orders a circular was produced and distributed to all major customers at a cost of €850. 7 The closing stock figure includes 60 yards of leather valued at €20 per yard, being the cost per yard shown on the last purchase invoice received. This invoice was for 40 yards of leather. The previous invoice received was for 70 yards of leather at a cost of €18 per yard. BEOUTREMENTS VIDEO S - Prepare a schedule amending the stock figure as at 30/6/20x0 as necessary to comply with IAS2. Outline your reason for either making or not making an amendment to closing stock for the above 7 discoveries. (40 marks)

Answer 1

	Workings for Woodcraft Ltd.
	Particulars	Amount
	Closing Stock Value of Office Furniture	€    297,240.00
1	Closing Stock Over Valued ( 1700 - 1500 = 200 ) Value of Closing Stock to be taken at the Net Realisable Value or the Cost which ever is Less.	€         (200.00)
2	Total Cost of the Furniture = (3800+350=4150) Net Realisable Value of this Stock = 4200 As the cost is lower, the goods shall be valued at Cost. So the additional Cost of 350 shall be added to the value of Inventory.	€          350.00
3	Over Valuation of Stock Free Samples received should not be taken at cost as no price is paid for the same and also they will not generate any Revenue. So, the Value included in Stock shall be removed.	€         (650.00)
4	Value of Stock not included = 2200+20% The Goods in transit as have been billed to us shall be included in the Inventory.	€        2,640.00
5	Over Valuation of Stock As the Goods are not with us, we should not include the Value of these Goods in our Stock. If the given sale is not concluded, it shall be added back to the Inventory as a Sales Return.	€        3,450.00
6	Cost of Inventory not included = 33000+850 As the said expense has been incurred to acquire the goods, it is taken that the ownership of the said goods have passed on to the buyer. (Note:- The situation states that the transaction was entered into with the manufacturing Unit after it went bankrupt, and the stock rights have been duly acquired from the SPV of the Bankrupt Firm and so we have the right over the goods purchased.)	€      33,850.00
7	The Stock shall be valued at Cost. The value of 20 yards of leather is over valued in the books @ 2 per yard, and the same shalll be now reduced from the value of closing Inventory.	€           (40.00)
	Adjusted Value of Closing Stock	€ 336,640.00