Explain Three Inventory Valuation Methods, Discuss the Implications - Management Assignment Help

Assignment Task:

Task:

Part A 
Question 1
Explain three inventory valuation methods, and discuss the implications of choosing different inventory methods. How these methods are used to manipulate net income and pay lesser tax? (22 marks)

Question 2
High receivable turnover days are one of the major cause of insolvency. Cash flow planning involves making sure that a business generates enough cash to be able to pay day-to-day expenses.

For example, many manufacturing businesses have a cash cycle. They buy raw materials and parts on credit and then manufacture goods, which they store as stock. They then sell these goods on credit to customers. In the meantime, they have overheads and a workforce to pay. A problem for traders is that they expect credit customers to pay on time. This provides the cash to continue the credit cycle and to pay wages and other outstanding bills. Unfortunately, the cycle often breaks down because very often credit customers are slow to pay. This leaves the businesses with a cash flow problem and increase its receivable turnover days.

a) Based on the information above, recommend five different strategies that businesses can implement in order to reduce its receivable turnover days. (10 marks)

Part B (24 marks)
Question 1
National food is a producer of prepackaged food. The unadjusted trial balance as at 31 st August 2019 is provided below:

National Food

Unadjusted Trial Balance as at 31 st August 2019

Account Title Debit Credit
  RM RM
Bank 500,000  

Purchases and sales 350,000 620,000

Debtors and Creditors 40,000 56,000
Plants and machinery 200,000  
Delivery Van 100,000
Withdrawals 70,000  

Sales return and purchases return 4,000 3,000

Salaries expense 27,000  

Inventory (as at 1st September 2018) 16,000  

Accumulated depreciation (plants and machinery)   100,000

Electricity expense 12,000  

Provision for doubtful debts   5,000

Capital (as at 1st January 2018)   565,000

Advertising expense 30,000  

TOTAL
1,349,000 1,349,000
     
While preparing the financial statements for the business, the accountant was given the following additional information.

 Plants and machinery is depreciated using reducing-balance method at 20% per annum.
 Delivery Van is depreciated using straight-line method. The estimated life of delivery Van is 8 years with RM20,000 residual value. The delivery Van was purchased on 1 st March 2019.
 Advertising expense included prepaid advertising (RM5,000) for September 2019.

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