4.5. Valuation of inventory
A subsection of Accounting, 7707, through 4. Accounting procedures
Listing 10 of 30 questions
Rani is a trader. Her financial year ends on 31 March. She provided the following information about her three types of inventory at 31 March 2020. Inventory Number Cost Selling price Selling expenses item of units per unit per unit per unit $ $ $ A B C REQUIRED Calculate the total value of Rani’s inventory at 31 March 2020. Rani later discovered that she had an amount of inventory of item D at 31 March 2020. This inventory originally cost $1660. She considered this inventory to be obsolete. REQUIRED Explain to Rani how the value of the inventory of item D affected the profit for the year ended 31 March 2020. Advise Rani whether or not she should stop purchasing item D to avoid having obsolete inventory in the future. Justify your answer by providing advantages and disadvantages. Rani earns advertising income by placing advertising boards in her shop window. The following details relate to her advertising income. On 1 April 2019 Rani had received $420 in advance, and $300 was owed to her. During the year ended 31 March 2020, Rani received cheque payments totalling $6000. She decided to write off the amount of $300 due to her. On 31 March 2020 Rani had received $500 in advance, and $400 was owed to her. REQUIRED Prepare the advertising income account in the ledger of Rani for the year ended 31 March 2020. Balance the account and bring down the balances on 1 April 2020. Rani Advertising income account Date ……… ……… ……… ……… ……… ……… ……… ……… ……… Details ……………………… ……………………… ……………………… ……………………… ……………………… ……………………… ……………………… ……………………… ……………………… $ ……… ……… ……… ……… ……… ……… ……… ……… ……… Date ……… ……… ……… ……… ……… ……… ……… ……… ……… Details …………………… …………………… …………………… …………………… …………………… …………………… …………………… …………………… …………………… $ ……… ……… ……… ……… ……… ……… …… ……… ……… Explain to Rani the effect on gross profit of recording sales of inventory as advertising income.
7707_s20_qp_21
THEORY
2020
Paper 2, Variant 1
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Ekua is a trader who sells household furnishings. She has provided the following information. $ At 30 April 2022: Inventory 14 650 Trade receivables 12 700 Bank overdraft 5 375 Trade payables 7 125 For the year to 30 April 2022: Revenue 112 300 Purchases 72 250 Expenses 19 820 All sales and purchases are on credit. Inventory at 1 May 2021 was valued at $12 800. REQUIRED Complete the following tables. Gross margin workings answer (to two decimal places) Profit margin workings answer (to two decimal places) One of Ekua’s suppliers has offered to sell her a large quantity of inventory at a reduced price. Ekua is considering accepting this offer and increasing her expenditure on advertising in order to sell more inventory. REQUIRED Advise Ekua whether she should purchase the additional inventory. Justify your answer by providing two advantages and two disadvantages. Explain the meaning and importance of the principle of consistency in the preparation of financial statements. State two non-financial factors which may affect Ekua’s trading results.
7707_s22_qp_21
THEORY
2022
Paper 2, Variant 1
View
Questions Discovered
30