If in the asserts-liability statement the value of the closing stock is $1580 and then there is an additional note which says:
Stock valued at $4240 had been discarded during the year as it had deteriorated and could not be sold
How will I account for it?
Can someone help me because I have my exam tonight? Thanks!
To account for the discarded stock in the closing stock valuation, you will need to adjust the value of the closing stock.
Here's how you can calculate it:
1. Start with the initial value of the closing stock mentioned in the asserts-liability statement, which is $1580.
2. Subtract the value of the discarded stock from the closing stock. In this case, the discarded stock is valued at $4240. So, subtract $4240 from $1580:
$1580 - $4240 = -$2660
The negative sign indicates that the closing stock value has decreased due to the discarded stock.
3. Adjust the closing stock value in the asserts-liability statement by adding the result from step 2. In this case, add -$2660 to the initial closing stock value:
$1580 + (-$2660) = -$1080
The adjusted value of the closing stock after accounting for the discarded stock is -$1080.
It's important to note that a negative closing stock value indicates that overall, the stock has a negative value, possibly due to accumulated losses or deteriorated assets that couldn't be sold.
Make sure to double-check your accounting principles and any specific guidelines provided by your course material before applying this approach in your exam. Good luck!