The draft accounts of Sellas plc for the year ended 31 December 2016 show a net profit before tax of $327,900 and closing trading stock at cost of $253,850 following a physical stock count During the audit of the accounts the following matters have come to light Stock costing $28,000 has been omitted from the closing stock figure Items included in stock at $13,400, and which would normally be sold for $19,800, were in a damaged state and were worth only $5,200 Sellas plc received an order on 23 December 2016 to supply goods at a total price of $63,000 The goods, which had cost $34,000, were moved on the following day from the stores to the packing department and were despatched on 2 January 2017 when the customer was invoiced Sellas plc had included the order in sales for 2016 and had excluded the goods from closing stock 4,200 items costing $12 each were recorded on the stock sheets in error as 2,400 items at $22 each Stock costing $15,000 was lost in a fire in the warehouse during the year The companys insurers have agreed to pay Sellas plc $17,300 in respect of its insurance claim No entry has yet been made in the accounting records Included in purchases is $37,400 for goods purchased in December and which were received into the warehouse on 2 January 2017 Stock costing $22,000 has error been treated as a fixed asset and depreciation of 12 of cost has been provided for Returned stock costing $825 has been treated in the accounting records as a return outward instead of a return inward An item is included in the closing stock valuation at its selling price of $10,200 The gross profit margin on this item is 60 Required Calculations to show the correct figure for Sellas plc for Net profit before tax for 2016, and Trading stock at 31 December 2016 Your answer to the following questions posed by the purchasing directors of Sellas plc Prices are rising all the time and I think we should change our stock valuation method from FIFO and LIFO or average cost What do you think about this Can we do it

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The draft accounts of Sellas plc for the year ended 31 December 2016 show a net profit before tax of $327,900 and closing trading stock

The draft accounts of Sellas plc for the year ended 31 December 2016 show a net profit before tax of $327,900 and closing trading stock at cost of $253,850 following a physical stock count.

During the audit of the accounts the following matters have come to light:

Stock costing $28,000 has been omitted from the closing stock figure.
Items included in stock at $13,400, and which would normally be sold for $19,800, were in a damaged state and were worth only $5,200.
Sellas plc received an order on 23 December 2016 to supply goods at a total price of $63,000. The goods, which had cost $34,000, were moved on the following day from the stores to the packing department and were despatched on 2 January 2017 when the customer was invoiced. Sellas plc had included the order in sales for 2016 and had excluded the goods from closing stock.
4,200 items costing $12 each were recorded on the stock sheets in error as 2,400 items at $22 each.
Stock costing $15,000 was lost in a fire in the warehouse during the year. The company’s insurers have agreed to pay Sellas plc $17,300 in respect of its insurance claim. No entry has yet been made in the accounting records.
Included in purchases is $37,400 for goods purchased in December and which were received into the warehouse on 2 January 2017.
Stock costing $22,000 has error been treated as a fixed asset and depreciation of 12% of cost has been provided for.
Returned stock costing $825 has been treated in the accounting records as a return outward instead of a return inward.
An item is included in the closing stock valuation at its selling price of $10,200. The gross profit margin on this item is 60%.

Required:

Calculations to show the correct figure for Sellas plc for:

Net profit before tax for 2016, and
Trading stock at 31 December 2016.
Your answer to the following questions posed by the purchasing directors of Sellas plc:

‘Prices are rising all the time and I think we should change our stock valuation method from FIFO and LIFO or average cost. What do you think about this? Can we do it?’