The data below relate to the business of commodity dealer J. Smith:

(i) Started business with capital in cash of £1,000.

(ii) Bought stock for resale for cash £500.

(iii) Paid expenses in cash £40.

(iv) Sold on credit stock which cost £100 for £200 (this 'mark up' is standard in this type of business).
(v) Collected cash on account from debtor £50.
(vi) Sold on credit further stock which cost £200 for £400.
Required:

(a) Prepare successive balance sheets to show the effect of recognizing revenue (and profit) at:
(i) the 'point of sale', (ii) the 'completion of production' (i.e. when stock is acquired), (iii) the 'receipt of cash'.

(b) Explain carefully the basis of stock and debtor valuation in each of the above examples.