1 On 1 January Mr G started a small business buying and selling a special yarn. He invested his savings of

£40 000 in the business, and, durtng the next six months, the following transactions occurred:

The yam is stored in premises Mr G has rented, and the closing stock of yam, counted on 30 June, was 500 boxes.
Other expenses incurred, and paid in cash, during the six month period amounted to £2300.
Required:

(a) Calculate the value of the material issues during the six month period, and the value of the closing stock at the end of June, using the following methods of pricing:
(i) first-in, first-out;
(ii) last-in, first-out:
(iii) Weighted average (calculations to two decimal places only)

(b) Calculate and discuss the effect each of the three methods of material pricing will have on the reported profit of the business, and examine the performance of the business during the first six month period.

Transcribed Image Text:

Yarn purchases Total Yarn sales Total Date of receipt quantity cost Date of quantity value (boxes) () despatch (boxes) () 13 January 200 7200 10 February 500 25000 8 February 400 15 200 11 March 600 24 000 20 April 600 27000 12 April 400 14000 15 June 500 14000 25 June 400 15200