manufacturing account Watch

_junior
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#1
Report Thread starter 4 weeks ago
#1
i have market value of finished goods to 382000
and i have the closing inventory of finished goods to be 25000
which type of inventory should i have in my statement of financial position and why
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Elwak
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25000, the general rule is that inventory should be valued at the lower of market value and cost. That way you will avoid overstating the profits
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_junior
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(Original post by Elwak)
25000, the general rule is that inventory should be valued at the lower of market value and cost. That way you will avoid overstating
Oh okay thanks
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_junior
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(Original post by _junior)
Oh okay thanks
But why is that you use the market value of finished goods as part of costs of sales and not the costs of production
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Elwak
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Market value of finished goods should not be a part of cost of sales. The cost of sales for a manufacturing company should be beginning inventory + cost of goods manufactured - ending inventory of finished goods. The goal here is to find the cost of the goods that were manufactured within the period, therefore the market value of finished goods should not be part of this
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