Multiple choice

S Ltd. follows perpetual inventory system. On March 31 of every year, the company undertakes physical inventory verification. On March 31, 2016, the value of inventories as per the records differed from the values of the inventory as per physical inventory.

On scrutiny, the following differences were noticed:

  1. Goods purchased for Rs. 10,000 were received and included in the physical inventory, but no entry was made in the books.
  2. Goods costing Rs. 30,000 were sold and entered in the books, but the inventory was yet to be delivered.
  3. Goods worth Rs. 5,000 were returned to the suppliers, but were omitted from the record.

If the inventory is valued in the books at Rs. 1,50,000, what is the value of the physical inventory?

  1. Rs. 1,11,000

  2. Rs. 1,89,000

  3. Rs. 1,85,000

  4. Rs. 1,59,000

  5. None of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Amount of goods purchased and included in the physical inventory will be added in the value of the inventory in the books. Also, the amount of goods sold and entered in the books, but not delivered, are to be added in the amount of physical inventory. Further, the goods returned, but omitted to be recorded, are to be deducted from the amount of inventory. So, physical inventory = (1,50,000 + 10,000 + 30,000 - 5,000) = Rs. 1,85,000

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