MCM301 Assignment 02
Wednesday, January 26, 2011 Posted In mcm Edit ThisSemester "Fall 2010"
"Financial Accounting II (MGT401)"
Assignment No. 02 Marks: 10
Question
During 2009, company XYZ Ltd. found that certain items had been included in the inventory at 31st Dec, 2008, valued at Rs.4.5 millions which had in fact been sold before the year end. The following figures were reported for the year 2008:
Rs. (‘000)
Sales 50,400
Cost of goods sold (34,570)
Profit before taxation 15,830
Income tax (4,749)
Net Profit 11,081
While the draft figures for the year 2009 are as follows:
[font=Times New Roman,Times New Roman]
Rs. (‘000)
Sales 70,000
Cost of goods sold (55,800)
Profit before taxation 14,200
Income tax (4,260)
Net Profit 9,940
The cost of goods sold for the year 2009 includes the value of error in inventory equal to Rs.4.5 millions. Income tax is applied on the company by the taxation agency . 30 % p.a.
Requirement
Prepare the restated income statements for the year 2009 and 2008 as comparative by adjusting the aforementioned inventory error. Show the related calculations of inventory error adjustment as it also carry marks.
