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1)Which types of companies would most likely use a process costing system and which types of companies would use job costing? Provide examples of two Saudi Companies
1)Which types of companies would most likely use a process costing system and which types of companies would use job costing? Provide examples of two Saudi Companies.
Explain the methods with which the cost per unit will be calculated for each type of company using numerical example.
2)At the end of 2020, Marigold Corporation owns a licence with a remaining life of 11 years and a carrying amount of $534,000. Marigold expects undiscounted future cash flows from this licence to total $538,500. The licence's fair value is $429,500 and disposal costs are estimated to be nil. The licence's discounted cash flows (that is, value in use) are estimated to be $474,900. Marigold prepares financial statements in accordance with ASPE. (a) Your answer partially correct. Try again. Determine if the licence is impaired at the end of 2020. The licence is not impaired at the end of 2020. Prepare any related entry that is necessary. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) Account Titles and Explanation Debit Credit Accumulated Amortization 454001 Recovery of Loss from Imp
Expert Solution
1)
Process Costing :- A process costing system is used by the companies which produces similar types of products. They are producing their products in batches applying the similar & consistent process. For example Saudi Aramco (Petroleum products) & Saudi Basic Industries (chemical Industy) are the two industries doing work on te basis of Process costing method.
Job Costing:- A Job costing system is used by the companies which produces new and the latest products. The products made by these companies are unique in itself. For Example Samba Financial group & Al Tazaj are the two companies in the Saudi Arabis which uses Job costing.
Method used in calculating Process Costing
FIFO (First in First out) is the method used in calculating process costing . Under this method the first item come is assumed as go first, It is normally used for Inventory valuation.
For Eg.
| Date | particular | Amount | ||
| 01-01-2020 | Purchase 100 units @ 15/-unit | 1500 | ||
| 08-01-2020 | Purchase 200 units @ 18/-unit | 3600 | ||
| 18-01-2020 | Sale 150 units | |||
| Valuation of inventory as on 31/01/2020? | ||||
| Date | Particular | New Purchase Qty | Rate | Total Qty |
| 01-01-2020 | Purchase 100 units @ 15/-unit | 100 | 15 | 100 |
| 08-01-2020 | Purchase 200 units @ 18/-unit | 200 | 18 | 300 |
| 18-01-2020 | Sale 150 units | -150 | - | -150 |
| Closing stock as on 31/01/2020 | 150 | 18 | 150 | |
| Value of closing stock of 150 units is at the rate of 18/- is 2700 |
Method used in calculating Job Costing
Average method:-For calculating cost per unit, Average cost is taken for each job. Since each product is made different from the other, price is charges accordingly.
For eg. A accounting firm providing auditing service to their client the Bill is charged per man day. For Senior Staff rate is $ 1000 per day per person and for the junior staff is $400 /- per day per person. Total 1 senior present for 5 day and 2 junior is for 15 day. The bill charges are:-
Senior staff = 1 person for 5 day = $1,000 per person per day = $5,000
Junior Staff = 2 person for 15 day = $400 per person per day = $12,000
2)
| As the sum of undiscounted future cash flows exceeds carrying value of asset, the asset is not impaired. |
| The license is not impaired at the end of 2020 | ||
| Account Titles and Explanation | Debit | Credit |
| No entry | 0 | |
| No entry | 0 | |
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