R Limited has traditionally valued its inventory using the weighted average method of valuation. During the year ended 31 December 2018, the directors of R Limited decided to change the method of inventory valuation to the FIFO method in order to give a fairer presentation of the company’s results and financial position. The reported retained earnings of R Limited at 31 December 2016 were Ghs/Ghs2,500,000 and extracts from the company’s financial statements for each of the last three year, on the basis of inventory being valued on a weighted average basis, are provided below are: Year End 2016 (Ghs) 2017 (Ghs) 2018 (Ghs) Cost of sales 830,000 904,000 968,000 Profit after tax 50,000 80,000 105,000 Inventory valuation: Weighted Average 275,000 257,000 304,000 FIFO 296,000 294,000 365,000 Based on the information provided, show how the change in inventory valuation method will be reflected in the financial statements of R Limited for the year ended 31 December 2018
R Limited has traditionally valued its inventory using the weighted average method of valuation. During the year ended 31 December 2018, the directors of R Limited decided to change the method of
Year End 2016 (Ghs) 2017 (Ghs) 2018 (Ghs) Cost of sales 830,000 904,000 968,000 Profit after tax 50,000 80,000 105,000 Inventory valuation: Weighted Average 275,000 257,000 304,000 FIFO 296,000 294,000 365,000
Based on the information provided, show how the change in inventory valuation method will be reflected in the financial statements of R Limited for the year ended 31 December 2018.
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