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This branch sells Arctic TV sets - NSC Accounting - Question 2 - 2023 - Paper 2
Question 2
This branch sells Arctic TV sets. 2.1.1 Calculate the value of the closing stock of the Arctic TV sets on 28 February 2023 using the first-in-first-out (FIFO) metho... show full transcript
Worked Solution & Example Answer:This branch sells Arctic TV sets - NSC Accounting - Question 2 - 2023 - Paper 2
Step 1
Calculate the value of the closing stock of the Arctic TV sets on 28 February 2023 using the first-in-first-out (FIFO) method.
Answer
To calculate the value of the closing stock using the FIFO method, we first need to evaluate the stock remaining after sales:
-
Stock Available for Sale:
- Opening Stock: 280 units
- Purchases:
- May 2022: 500 units
- August 2022: 400 units
- September 2022: 300 units
- January 2023: 300 units
- Total Units Available = 280 + 500 + 400 + 300 + 300 = 1,780 units
-
Sales:
- Total Sold: 1,550 units
-
Closing Stock Calculation:
- Total Closing Stock = Total Available - Total Sold
- Closing Stock = 1,780 - 1,550 = 230 units
Using FIFO, we consider the units sold in the order they were purchased:
- Cost of Stock Sold:
- From Opening Stock: 280 units at R4,100 = R1,148,000
- From May 2022: 500 units at R3,800 = R1,900,000
- From August 2022: 400 units at R3,950 = R1,580,000
- From September 2022: 300 units at R4,100 = R1,230,000
Now calculating the closing stock from remaining:
- Closing Stock:
- Units Remaining = 270 (given)
- Cost equals: 240 units at R4,100 + 30 units at R4,000 = 1,104,000
Thus, the value of the closing stock is R1,104,000.
Step 2
Calculate the stockholding period (in days) using the closing stock figure.
Answer
The stockholding period can be calculated using the formula:
From the data:
- Closing Stock: R1,104,000
- Cost of Sales: R6,100,000
Thus, substituting the values:
So, the stockholding period is approximately 67 days.