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1 markInventory Valuation Methods

CSEC Principles of Accounts · May/June 2011 · Paper 2 · Question 7(a)(iv)

Trading details for Cartel Vee selling leather sandals for July 2010 are provided.

State the MAIN reason why it is necessary to know the stock valuation method being used by a firm.

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Other parts of this question

  1. 7(a)(i)Calculate the amount of units held as unsold stock at year end.[3 marks]
  2. 7(a)(ii)Calculate the value of closing stock using the: a) FIFO method, b) LIFO method.[2 marks]
  3. 7(a)(iii)Calculate the Gross Profit for Cartel Vee using the LIFO value for closing stock.[5 marks]
  4. 7(a)(v)Calculate the cost price that would be used for the AVCO method in valuing closing stock.[4 marks]
  5. 7(a)(vi)What ratio can be calculated to measure how quickly Cartel Vee sells his stock?[1 mark]
  6. 7(b)(i)Which of the ratios above measures control of costs?[1 mark]
  7. 7(b)(ii)Which of the ratios above measures a firm's ability to meet its short-term debts?[1 mark]
  8. 7(b)(iii)Prepare a short report, using both ratios, comparing Cartel Vee's performance with that of his competitor.[2 marks]

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