Answer to Question #130195 in Math for Nahashon Kimathi

Question

QUESTION THREE (10 marks)
Villandry's inventory includes three items for which the following details are available.
Supplier's Net realisable
list price value
Shs. Shs.
Product A 3,600 5,100
Product B 2,900 2,800
Product C 4,200 4,100

The company receives a 2½% trade discount from its suppliers and it also takes advantage of a 2% discount for prompt payment.

Required:
(a) Calculate the total value of products A, B and C which should be shown in inventory in the statement of financial position.
(b) Explain the difference that changing from a weighted average to FIFO method of inventory valuation is likely to have on an entity's profit or loss.

Answer 1

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