Question 1 (a)
Stock of a business that is not a going concern
2 marks
- Time to write
- About 4 minutes
From an older CBCS paper
Question
Question 1 (a) · 2 marks1(a)The Closing Stock cost ₹ 7,50,000. Its Realizable value is 120%, and Realizable Expenses are 5%.In the Income Statement of Malhotra co, which is not a going concern, at what amount stock wil be shown. [2 Marks]
Reworded from the university paper: names and figures differ, the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.
Before you write
Read off the question and its marks
What the paper leaves open
"Wil" is kept as printed. The stock is measured at its net realisable value because the company is not a going concern.
Write it in this order
- 1 Basis: not a going concern, net realisable value 1 mark 2 min
- 2 Amount 1 mark 2 min
Try it first. About 4 minutes for 2 marks. Write it out, then open the solution.
Solution
Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.
Principle. For a going concern, assets are carried at cost because the business intends to go on using them; but if the business is winding up and must sell its assets, original cost is no indicator of realisable value. So Malhotra Co., which is not a going concern, shows its stock at net realisable value: the estimated selling price less the estimated costs necessary to make the sale (paper note).
| Particulars | ₹ |
|---|---|
| Realisable value (120% × 7,50,000) | 9,00,000 |
| Less: realisation expenses (5% × 9,00,000) | 45,000 |
| Stock shown in the income statement | 8,55,000 |
Where the 2 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | Basis: not a going concern, net realisable value | 1 |
| 2 | Amount | 1 |
| Total | 2 |
Report a problemopens an email to admin@getkunji.com with the question IDFAH21-Q1aalready filled in.