BKAR2023 FINANCIAL ACCOUNTING AND REPORTING II (A222)

MINI CASE 2:
INVENTORIES

DUE DATE: 2 May 2023

Guidelines for submission:

1) Please answer all questions.

2) Please write your name, matric number, group on the header and page number on the
bottom of your answer document.

3) The mini case is an individual task; however, discussion is allowed, but copying other
student’s answer is forbidden.

4) Your answer should be handwritten and subsequently scanned with a scanner or mobile
scanner apps in a combined PDF file. The scanned document must be clear, easily
readable, and complete. Photo is not allowed.

5) Submit your scanned answer via Online Learning portal → within

the allotted time and period, before 2 May 2023 (MYT). Only one submission will be
accepted.

1
QUESTION 1

Zoom Bee Bhd determined its ending inventory at cost and at NRV on 31 December 2020, 31
December 2021 and 31 December 2022, as shown below.

Costs (RM) NRV (RM)

31 December 2020 250,000 250,000
31 December 2021 290,000 255,000
31 December 2022 275,000 287,000

REQUIRED:

Prepare the journal entries required on 31 December 2021 and 31 December 2022, assuming
that Zoom Bee Bhd uses the perpetual inventory system and loss method with allowance account
reduced to LCNRV.

QUESTION 2

Pelastik Bhd is a company that manufactures and distributes plastics cabinet/storage across
Malaysia. The company follows the practice of valuing inventory at the Lower of Cost or Net
Realizable Value (LCNRV). The following information is available from the company’s inventory
records as of 31 December 2022.

Item Quantity Cost per Estimated Completion and

Unit (RM) selling Price/ Selling Cost
Unit (RM) /Unit
Shoe Drawer 300 215.00 202.00 5.00
Wardrobe 550 108.00 197.00 8.00
Kitchen Rack 800 98.00 80.00 11.00
2-tier Cabinet 230 210.00 156.00 6.00
3-tier Cabinet 420 232.00 293.00 4.00

REQUIRED:

(a) Calculate the LCNRV using the “individual-item” approach.

(b) Prepare the journal entries as at 31 December 2022 assuming that a loss method and the
Allowance to Reduce Inventory to NRV Account is used to record the write down of the
inventory.

2
(c) Assume that as at 31 December 2022, the account of Allowance to Reduce Inventory to
NRV had a credit balance of RM15,000. Determine the amount of the gain or loss that
would be recorded due to the change in the Allowance to Reduce Inventory to NRV
Account as in (b). Show the related journal entries.

QUESTION 3

Tambah Cantik Bhd installs replacement siding, windows and louvered glass doors for
condominium complexes. The company is in the process of preparing its annual financial
statements for the fiscal year ended 31 March 2023. On that date, the balance in Tambah Cantik
Bhd Inventory account was RM408,000 and Allowance to Reduce Inventory to Net Realisable
Value (NRV) had a credit balance of RM32,000. The relevant inventory costs and market data on
31 March 2023 is summarised in the schedule below.

Inventory Cost (RM) Sales Price (RM) Net Realisable

Value (RM)
Aluminium siding 70,000 64,000 56,000
Cedar siding 86,000 94,000 84,800
Louvered glass doors 112,000 186,400 168,300
Thermal windows 140,000 154,800 140,000
Total 408,000 499,200 449,100

Tambah Cantik Bhd applies the Loss Method and use an Allowance Account to record for the
write down of the inventory to net realisable value.

REQUIRED:

(a) Assuming that Tambah Cantik Bhd applies the LCNRV rule to item by item. Determine
the proper balance in Allowance to Reduce of Inventory to Net Realisable Value Account
on 31 March 2023.

(b) For the financial year end 31 March 2023, determine the amount of the gain or loss that
would be recorded due to the change in Allowance to Reduce Inventory at Net Realisable
Value. Prepare the related journal entry.

(c) Identify TWO (2) differences between consignor and consignee in a consignment basis.