Australia Inventory and change of estimating policy

[Jayde Cantamessa]

hi everyone,

I'm new to the industry and studying my first foundation exam to get into the cpa program.

I've attached a question and answer from my study manual that has me stumped. I cannot understand how they have one to their answer with the information provided.

How does the change in inventory (I'm assuming it's not sold) affect the cost of good sold in this example?

Help explaining how they arrive at the new figures would be appreciated!

Thank you!

 

[Triest123]

"The increase in the value of opening inventory" will result in increasing the value of the cost of goods sold.

"The increase in the value of closing inventory" will result in decreasing the value of the costs of goods
sold

 

[Jayde Cantamessa]

"The increase in the value of opening inventory" will result in increasing the value of the cost of goods sold.

"The increase in the value of closing inventory" will result in decreasing the value of the costs of goods
sold

Thank you. I'm still unsure how they've arrived at those figures using the info provided!!!

 

[Triest123]

In the year 20x6
The decrease in value of opening inventory:
2,800 -2,700 = 100

The decrease in value of closing inventory:
2,900 - 2,750 = 150

So, the value of cost of goods sold was increased by : 150 - 100 = 50

The cost of goods sold for the year 20x6 was
24,000 + 50 = 24,050

 

[Jayde Cantamessa]

Thanks so much for your time. Is your information in " " in your first post a generally accepted accounting rule is it? As I'm new to accounting these things are foreign to me so I need to get my head around it!

 

[Jayde Cantamessa]

Thanks so much for your time. Is your information in " " in your first post a generally accepted accounting rule is it? As I'm new to accounting these things are foreign to me so I need to get my head around it!

Got it! I just didn't understand the way you had written it but basically it's just opening inventory , minus closing inventory equals cost of goods sold! Thanks again!