Reference no: EM132880790

Question -

(I) A firm manufactures a product from a raw material, which is purchased at 60 per kg. The company incurs a handling cost of 360 plus freight of 390 per order. The incremental carrying cost of inventory of raw material is 0.50 per kg. per month. In addition, the cost of working capital finance on the investment in inventory of raw material is 9 per kg. per annum. The annual production of the product is 1,00,000 units and 2.5 units are obtained from one kg of raw material.

Required -

Calculate the economic order quantity of raw materials.

Advise, how frequently should orders for procurement be placed.

(II) The ledger records of Rockers Ltd has the under mentioned liability accounts:

Unearned service revenue=16,680

Sales tax payable=8,490

Accounts payable=54,470

1. In the month of January dated 05, the company sold merchandise of cash amounting to 16,200, which includes 8% sales tax amount.

2. Jan-12-Services to customers who made advance payment of 11,490

3. Jan-14-Payment paid to state revenue department for sales tax collected in december 2014 (8,490)

4. Jan-20-Company sold 800 units of a new product on credit at 50 per unit, plus 8% sales tax

5. Jan-21-Borrowed 27,000 from Emerald Bank on 3-month, 8%, 27,000 note.

6. Jan-25-Company sold merchandise for cash totaling 10,098 which includes 8% sales tax.

Required -

A. January transactions-Journal entries

B. January transactions-Journal entries at Jan 31 for outstanding notes payable

(III) A Ltd purchased debentures worth 10 lacs of B Ltd., which are redeemable within three months. How will you show this item in the statement while preparing cash flow statement for the year ended on 31st March, 2018?