Vasundara Oil and Ami Limited Case Soln

Vasundhra Oil India
FIFO
LIFO
Average
Sales
9,45,000
9,45,000
9,45,000
Beginning Inventory
3,00,000
3,00,000
3,00,000
Purchases
8,73,000
8,73,000
8,73,000
Closing Inventory
3,88,500
3,85,500
3,81,225
COGS
7,84,500
7,87,500
7,91,775
25,000
25,000
25,000
1,35,500
1,32,500
1,28,225
Expenses
Total Profit/Loss
Purchases
!
2,00,000 x 2.85 = Rs. 5,70,000
!
!
!
1,00,000 x 3.03 = Rs. 3,03,000

!
!
____________
!
!
Rs. 8,73,000
Closing Inventory
!
FIFO
LIFO
Weighted Average
!
!
!
!
((1,00,000 x 3.00) + (2,00,000 x 2.85) + (1,00,000 x 3.03)) / 4,00,000

= 2.9325 per litre
1,30,000 x 2.9325 = Rs. 3,81,225
(1,00,000 x 3.03) + (30,000 x 2.85) = Rs. 3,88,500
(1,00,000 x 3.00) + (30,000 x 2.85) = Rs. 3,85,500
Ami Limited - FIFO
Date
Particulars
Amount
(Dr.)
Date
June
Opening Stock
8,400
October
July
Purchase
August
Particulars
Amount
(Cr.)
Cost of Sales
22,540
9,200
November Cost of Sales
35,510
Purchase
24,700
December Cost of Sales
26,250
September Purchase
52,500
December Goods Lost
5,250
Closing Stock
5,250
COGS
!
!
!
!
October:
!
!
Opening Stock value = 8400/200 = Rs. 42.00 per unit
(200 x 42.00) + (200 x 46.00) + (100 x 49.40) = Rs. 22,540
!
!
!
!
November:
!
!
(400 x 49.40) + (300 x 52.50) = Rs. 35,510
!
!
!
!
December:
!
!
(500 x 52.50) = Rs. 26,250
!
!
!
!
!
!
(100 x 52.50) = Rs. 5,250
Profit/Loss
!
!
!
!
Total Sales:
!
!
(500 x 66.00) + (700 x 70.00) + (500 x 75.00) = Rs. 1,19,500
!
!
!
!
Expenses:
!
!
Total Profit/Loss: 119500 - 84300 - 15250 = Rs. 19,950
Total COGS: 22540 + 35510 + 26250 = Rs. 84,300
10,000 + 5,250 = Rs. 15,250
Ami Limited - LIFO
Date
Particulars
Amount
(Dr.)
Date
June
Opening Stock
8,400
October
July
Purchase
August
Particulars
Amount
(Cr.)
Cost of Sales
26,250
9,200
36,130
Purchase
24,700
24,020
September Purchase
52,500
December Goods Lost
4,200
Closing Stock
4,200
COGS
!
!
!
!
October:
!
!
(500 x 52.50) = Rs. 26,250
!
!
!
!
November:
!
!
(500 x 52.50) + (200 x 49.40) = Rs. 36,130
!
!
!
!
December:
!
!
(300 x 49.40) + (200 x 46.00) = Rs. 24,020
!
!
!
!
!
!
(100 x 42.00) = Rs. 4,200
Profit/Loss
!
!
!
!
Total Sales:
!
!
(500 x 66.00) + (700 x 70.00) + (500 x 75.00) = Rs. 1,19,500
!
!
!
!
Expenses:
!
!
Total Profit/Loss: 119500 - 86,400 - 14200 = Rs. 18,900
Total COGS: 26250 + 36130 + 24020 = Rs. 86,400
10,000 + 4,200 = Rs. 14,200
Ami Limited - Weighted Average
Date
Particulars
Amount
(Dr.)
Date
June
Opening Stock
8,400
October
July
Purchase
August
Particulars
Amount
(Cr.)
Cost of Sales
24,947.50
9,200
34,926.50
Purchase
24,700
24,947.50
September Purchase
52,500
December Goods Lost
4,989.50
Closing Stock
4,989
COGS
!
!
!
!
!
!
Stock Value:
!
!
((200 x 42.00) + (200 x 46.00) + (500 x 49.40) +
!
!
(1000 x 52.50)) / 1900 = Rs. 49.895
!
!
!
!
October:
!
!
(500 x 49.895) = Rs. 24,947.50
!
!
!
!
November:
!
!
(700 x 49.895) = Rs. 34,926.50
!
!
!
!
December:
!
!
(500 x 49.895) = Rs. 24,947.50
!
!
!
!
!
!
(100 x 49.895) = Rs. 4,989.50
Profit/Loss
!
!
!
!
Total Sales:
!
!
(500 x 66.00) + (700 x 70.00) + (500 x 75.00) = Rs. 1,19,500
!
!
!
!
Expenses:
!
!
Total Profit/Loss: 119500 - 84,821.50 - 14989 = Rs. 19,689.50
Total COGS: 24947.50 + 34926.50 + 24947.50 = Rs. 84,821.50
10,000 + 4,989 = Rs. 14,989
Ami Limited - Best Valuation Method for Profit Measure
Last In First Out (LIFO) would be the best method of valuation for
measuring profit in this scenario. This is because the scenario depicts one with positive
rate of inflation and the prices keep increasing, in this case the net income quoted in the
income statement will be the least in LIFO, as can be observed from the results, as a
result the tax that would be payable is greatly minimized and would result in increased
cash flow. Even if all the inventory were to be exhausted, the tax payable would be equal
to FIFO and still the payment would have been delayed.

Vasundara Oil and Ami Limited Case Soln

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Vasundhra Oil India

2,00,000 x 2.85 = Rs. 5,70,000

1,00,000 x 3.03 = Rs. 3,03,000

((1,00,000 x 3.00) + (2,00,000 x 2.85) + (1,00,000 x 3.03)) / 4,00,000

1,30,000 x 2.9325 = Rs. 3,81,225

(1,00,000 x 3.03) + (30,000 x 2.85) = Rs. 3,88,500

(1,00,000 x 3.00) + (30,000 x 2.85) = Rs. 3,85,500

Ami Limited - FIFO

November Cost of Sales

December Cost of Sales

December Goods Lost

Opening Stock value = 8400/200 = Rs. 42.00 per unit

(200 x 42.00) + (200 x 46.00) + (100 x 49.40) = Rs. 22,540

(400 x 49.40) + (300 x 52.50) = Rs. 35,510

(500 x 52.50) = Rs. 26,250

(100 x 52.50) = Rs. 5,250

Total Profit/Loss: 119500 - 84300 - 15250 = Rs. 19,950

Total COGS: 22540 + 35510 + 26250 = Rs. 84,300

10,000 + 5,250 = Rs. 15,250

Ami Limited - LIFO

November Cost of Sales

December Cost of Sales

December Goods Lost

Opening Stock value = 8400/200 = Rs. 42.00 per unit

(500 x 52.50) = Rs. 26,250

(500 x 52.50) + (200 x 49.40) = Rs. 36,130

(300 x 49.40) + (200 x 46.00) = Rs. 24,020

(100 x 42.00) = Rs. 4,200

Total Profit/Loss: 119500 - 86,400 - 14200 = Rs. 18,900

Total COGS: 26250 + 36130 + 24020 = Rs. 86,400

10,000 + 4,200 = Rs. 14,200

Ami Limited - Weighted Average

November Cost of Sales

December Cost of Sales

December Goods Lost

Opening Stock value = 8400/200 = Rs. 42.00 per unit

(500 x 49.895) = Rs. 24,947.50

(700 x 49.895) = Rs. 34,926.50

(500 x 49.895) = Rs. 24,947.50

(100 x 49.895) = Rs. 4,989.50

Total Profit/Loss: 119500 - 84,821.50 - 14989 = Rs. 19,689.50

Total COGS: 24947.50 + 34926.50 + 24947.50 = Rs. 84,821.50

10,000 + 4,989 = Rs. 14,989

Ami Limited - Best Valuation Method for Profit Measure

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