Part A

On 1 January, Charlotte commenced a retail business, which buys and sells stationery. She started the business by investing $50,000 of her personal savings. She used the entire amount to buy stationery, which cost $1.00 per unit. During the year, Charlotte sold all the stationery for $1.25 per unit. By the end of the year, the cost of stationery was $1.20 per unit. Required Using current cost accounting, calculate the maximum dividend the business can pay out while still maintaining its:

i) Financial capital. 2 marks

ii) Physical capital. 2 marks

Part B

Use the following information to answer the questions below 1 January 31 December Accounts Payable 20,000 25,000 Accounts Receivable 2,000 3,000 Cash 10,000 5,000 Dividend Payable 5,000 ----- Inventory 15,000 10,000 Consumer Price Index 100 103 Inventory Index 100 101 Required Using current cost accounting,

i) Calculate the gain or loss on monetary items for the year. 5 marks

ii) Clearly explain why it is a gain or loss. 1 mark