1 Harold Foster

Harold Foster is a sole trader. Thieves broke into his warehouse on 13 March Year 7 and
stole all the inventory except for a quantity of goods, costing $250, which were in a locked
room.
Foster wishes to submit a claim to his insurance company for the inventory stolen and gives you
the following information:
1. Inventory at 31 December Year 6 was $2,170 cost price.
2. Purchases from 1 January Year 7 to the date of the theft amounted to $5,880. Of this total,
goods costing $430 were still in transit at 13 March Year 7.
3. Sales from 1 January Year 7 to the date of the theft amounted to $7,550. Of this total,
goods with a selling price of $750 were still in the warehouse at 13 March Year 7 and
were thus stolen. All goods are sold at a mark-up of 33 1/3%.
4. Goods with a selling price of $320 were sent to a prospective customer on approval on 12 March
Year 7.
5. Goods costing $180 were taken by Foster for private use during the period 1 January to 13
March Year 7.
Required:
Prepare a statement showing the cost of goods stolen on 13 March Year 7.
2 Robert Martin
Robert Martin is in business as a wholesaler and on 1 April Year 2 his inventory, which
consisted of 100 units, was valued at $8,000 on the FIFO basis.
Martin’s inventory transactions for April were as follows:
Year 2
April 7 Purchased 300 units at $81 per unit.
“ 11 Sold 200 units at $120 per unit.
“ 18 Purchased 400 units at $83 per unit.
“ 21 Sold 520 units at $124 per unit.
“ 24 Sold 60 units at $125 per unit.
“ 30 Purchased 130 units at $85 per unit.
A physical inventory check on 30 April Year 2 showed that 150 units were held in the warehouse.
Required:
1. Write up the inventory a/c for April Year 2 on the perpetual basis, using alternatively, the
FIFO method.
2. Prepare a trading a/c in columnar form showing the gross profit for April Year 2.
3. Using the periodic approach, calculate the value of inventory on 30 April Year 2 on the
FIFO basis. Show details of your calculations.
3 Codiva plc
Codiva plc is a wholesaling company which maintains its inventory account on the perpetual
weighted average cost basis (AVCO). On 1 December Year 8, 500 units of a total cost of
$6,000 were in inventory.
The company’s inventory transactions for December Year 8 were as follows:

Date Details Units Unit Cost Unit Selling Price

Year 8 $ $
Dec 6 Sold 300 24
“ 10 Purchased 600 14
“ 13 Purchased 200 16
“ 21 Sold 700 25
“ 27 Purchased 900 18
“ 31 Sold 400 28

An inventory-taking on 31 December Year 8 revealed an inventory shortage of 20 units.

Required:
1. Inventory a/c for December Year 8. Where necessary, make calculations to one decimal
place.
2. Trading a/c for December Year 8.
3. Trading a/c for December Year 8, using the AVCO periodic system of inventory
recording. Make calculations to the nearest $.
Tangible non-current assets
Activity 1
Norris purchased a new car from UK for $100,000 and requested to be sent by plane (cost $30,000)
instead of the normal way which cost $1,000. Additional costs are import duties $15,000, insurance for
the first year
$1,500, road tax $500 and other normal transportation expenses of $200.
Required:
Calculate the cost of the asset.

Activity 2 – Straight line method

Mead is a sole trader with a 31 December year-end. He purchased a car on 1 January at a cost of
$12,000. He estimates that its useful life is four years, after which he will trade it in for $2,400.
Required:
Calculate the annual depreciation charge using the straight line method.

Activity 3. – Reducing balance method

A trader purchased an item of plant for $1,000. The depreciation charge for each of the first five years
is to be calculated, assuming the depreciation rate on the reducing balance to be 20% p.a.
Required:
Calculate the depreciation rate to be used in calculating depreciation charge and the depreciation
charge for each of the 4 years

Activity 4 – Sum of the digits method

Thelma purchased an asset with a cost of $4,200 and useful life of four years. Thelma decided that it is
appropriate to use the sum of digits method for calculating the depreciation and estimated the residual
value to be $200.
Required:
Calculate the depreciation charge for each year using the sum of digits method.