3.1. Preparation of financial statements
A subsection of Accounting, 9706, through 3. Financial accounting (A Level)
Listing 10 of 678 questions
For Examiner's Use 3 Shostakovich Limited is a wholesale business selling three products: Preludes, Fugues and Sonatas. At present they use the FIFO method of inventory valuation but are considering a change. At 31 March 2013, Shostakovich Limited provisionally calculated its profit for the year at $86 300 using closing inventory valued at $10 200 under the FIFO method. The following information is also available at 31 March 2013: Different methods of inventory valuation for the three products provide the following closing inventory values: FIFO AVCO $ $ Preludes Fugues Sonatas Owing to a flood during the financial year it has been found that the total inventory of Sonatas has been damaged. It is estimated that the inventory could be sold by Shostakovich Limited at a selling price of $1200. This adjustment has not been accounted for in the inventory calculated above. REQUIRED Calculate the revised inventory valuation at 31 March 2013 using FIFO and AVCO. For Examiner's Use Calculate the revised profit for the year at 31 March 2013 using FIFO and AVCO. Explain three reasons why a business cannot normally use the latest selling price of its products to value the inventory. For Examiner's Use Advise Shostakovich Limited on why the distinction between capital and revenue expenditure is important when preparing financial statements. Shostakovich Limited’s statement of financial position at 31 March 2013 showed the following: $ Property 200 000 Accumulated depreciation 14 000 The value of the property is split equally between land and buildings. They had been owned for 7 years. On 1 April 2013 its property was revalued at $315 000. REQUIRED Prepare the journal entry to record this revaluation. A narrative is not required. Name the section in Shostakovich Limited’s financial statements where the surplus will appear. For Examiner's Use Shostakovich Limited will continue to use the same rate of straight line depreciation for its buildings. Calculate the depreciation charge for the year on buildings after the revaluation.
9706_w13_qp_21
THEORY
2013
Paper 2, Variant 1
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