THE INSTITUTE OF FINANCE MANAGEMENT

FACULTY OF ACCOUNTING, BANKING & FINANCE

DEPARTMENT OF ACCOUNTING & FINANCE
AFU-07202- INTRODUCTION TO FINANCIAL ACCOUNTING
TUTORIAL QUESTIONS-2016/2017

Question ONE
Define the term inventories as defined by the IAS 2 and explain what is meant by the term Net
Realizable Value
QUESTION TWO
Calculate the value of NRV and determine the value of closing Inventory to be reported into
financial statement from the following information. Item BX (Stock) was purchased for Tsh.
5,000,000/= in year 2001, this item can be sold at Tsh 7,000,000/= today, but in order to sale BX
at the mentioned price, one has to incur some costs such as repairing the item for sale Tsh.
1,000,000/=, paying agents to facilitate the sale Ts 500,000/=, documentation costs Tsh.
100,000/=. It is further expected that, after selling the BX Ts 2,000,000/= will be used to pay
school fees

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Required:
Compute ending inventory and cost of goods sold for statement prepared on 31st December,
under each of the following methods:
1. LIFO
2. FIFO
3. AVCO

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QUESTION FOUR
JIPU Company Ltd uses periodic inventory procedures and made the following sales and
purchases during the month of September:
Date Unit Unit cost
September 1 Balance 2,000 units @ 150
September 5 Sold 1,100 units
September 5 Purchased 4,000 units @ 155
September 10 Sold 3,200 units
September 15 Purchased 4,000 units @ 160
September 20 Sold 2,400 units
September 25 Sold 2,300 units
September 30 Purchased 3,000 @ 165
Required
a) Calculate the value of closing inventory using FIFO, LIFO and WAM (use periodic
system).
b) Calculate the cost of goods sold for the methods above (FIFO,LIFO and WAM)

QUESTION FIVE
Kumekucha Company, which began operations on January 2, 2014 sales a single product called
product X.The following data related to product X for the year.
Purchases during the year 2010 were as follow:
Date Units Unit Cost Total
TZS
January 2 250 2000 500,000
February 15 400 2000 800,000
April 8 500 2160 1080,000
June 6 200 2260 452,000
August 19 400 2300 920,000
October 5 300 2500 750,000
November 22 250 2800 700,000
TOTAL 2300 5,202,000

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Periodic inventory procedure is used. On December 31st 2014 a physical inventory of product
X showed that 400 units were on hands.
REQUIRED:
(a) Calculate the cost of ending stock (Applying the following method of inventory FIFO, LIFO,
WAM).
(b) What will be the gross profit of the company if the sale is TZS 10,000,000 and the NRV (Net
realizable Value) of the stock is TZS 700,000? (Calculate the gross profit using FIFO, LIFO, and
WAM).
QUESTION SIX
Mullac Limited sells four products J, K, L and M. At 31 August 2014 the following items are
held:
Cost Selling price
TZS TZS
J 4,759 5,200
K 2,172 2,300
L 3,223 3,300
M 6,747 7,100
5% sales commission is paid to the company's agents on all sales. What value for inventory
should be shown in the company's financial statements at 31 August 2004?

QUESTION SEVEN
At the end of a company’s first year on 31st March 2011, you are requested to complete the
closing stock figure from the following information.
DATE PURCAHSES SALES
April 2010 800 units at shs.600
May 2010 700 units
July 2010 1200 units at shs.800
September 2010 600 units
December 2010 100 units at shs.800
February 2011 400 units
March 2011 700 units at shs.1,000

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 Required
i. Value the Inventory using
(a) FIFO method
(b) LIFO method
(c) Weighted Average Method/Average Cost Method
ii. Comment on the results.

QUESTION EIGHT
During the month of January, February and March 2016, CHABBY Timber shop has made
purchases totaling TZS 9,600,000 and net sales amount to TZS 12,000,000.If the gross profit
margin is 20% and the opening stock was TZS 1,000,000.Calculate the cost of ending inventory
using gross profit method
QUESTION NINE
Using the following information below
Details Cost Retail
st
1 February-opening inventories 800,000 1,500,000
February Purchases 700,000 1,000,000
February Sales 400,000

Required:
Calculate the cost of ending inventories by using Retail method.
QUESTION TEN
FARAhma Supermarket in Mwanza has made purchases totaling of TZS 400,000,000 with a
retail price of TZS 500,000,000 and net sales amount to TZS 700,000,000 for the quarter ended
31st March 2016.If the gross profit margin is 20% and the available stock before the said
purchases was TZS 450,000,000 with retail price of TZS 562,000,000.
Required:
a) Use the gross profit method to calculate
i) Cost of ending inventories
ii) Cost of goods sold
b) Use Retail method to obtain
i) Cost of ending inventories
ii) Cost of goods sold