Great Buys Department Store uses the perpetual system of stock valuation. It records the following movement of stock for the first half of the year, 2010.

Purchases Sales

January 200 units @ $10 April 300 units @ $20

March 240 units @ $14 June 350 units @ $30

May 260 units @ $20

Required:

(a) Using the information above, calculate the value of stock at the end of June using the following methods:

(i) First in, First out

(ii) Last in, First out

(iii) Average Cost Method

(20 marks)

(b) Prepare a trading account to show the effects that all three methods above would have on gross profit. (15 marks)