Max Sport Ltd is a retailer of sporting equipment. The following table is relatedto the values of the inventory on hand at 30 June of the current tax year.

Description                          A                B              C             D               E

Cost                                 60,000        40,000     30,000    50,000     20,000

Market selling value    100,000     30,000     40,000     70,000    25,000

Replacement price       80,000       25,000     35,000     40,000    22,000



Required:

(a) Calculate the value of closing inventory to be used in order to minimisethe taxable income of Max Sport Ltd for the current tax year.(3 marks)

(b) If Max Sport Ltd had accumulated losses of $200,000, how should theclosing inventory be valued? Recalculate the value of closing inventory.(3 marks)

(c) Suppose a change in customer demand means that product A cannot besold. As a result, it has a scrap value of $5,000. How will this affect theanswer to (a)? Recalculate the value of closing inventory. Justify youranswer with reference to income tax legislation.(3 marks)

(d) On 30 May of the current tax year, Max Sport Ltd ordered a new line ofsport suits from Sweden at a cost of $20,000. They had arrived on 5 Juneof the current tax year. However, due to a devaluation of the Australian dollar, the cost to Max Sport Ltd of the goods increased by $1,500.Calculate the value of the newly-purchased sport suits as at 30 June ofthe current tax year. Justify your answer with reference to rulings.(3 marks)