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4.1 Give ONE word/term for each of the following statements - NSC Accounting - Question 4 - 2020 - Paper 2
Question 4
4.1 Give ONE word/term for each of the following statements. Write only the word/term next to the question numbers (4.1.1 to 4.1.4) in the ANSWER BOOK. periodic sy... show full transcript
Worked Solution & Example Answer:4.1 Give ONE word/term for each of the following statements - NSC Accounting - Question 4 - 2020 - Paper 2
Step 1
4.2.1 Calculate the Value of closing stock (using FIFO)
Answer
To calculate the value of closing stock using the FIFO method, we first identify the cost of the gas lamps available. Given the data:
- Opening stock: 180 units at R80 each = R14,400
- Purchases: 270 units at R90 each = R24,300
- Sales: 300 units
To find the closing stock:
- Calculate the total number of gas lamps sold.
- Total sold = 300 units.
- Apply FIFO:
- First sell from opening stock (180 units) = 180 × R80 = R14,400.
- Remaining units to sell = 300 - 180 = 120 units (taken from the purchases).
- Remaining sales from purchases (120 units) = 120 × R90 = R10,800.
- Calculate total closing stock:
- Total remaining units = Initial purchase (270 units) - Sold from purchase (120 units) = 150 units.
- Value of remaining (150 units) = 150 × R90 = R13,500.
- Hence, the value of closing stock = R14,400 + R13,500 = R27,900.
So the value of closing stock is: R27,900.
Step 2
4.2.2 Calculate the Stockholding period in days (using closing stock)
Answer
The stockholding period can be calculated using the formula:
- Average Stock = (Opening Stock + Closing Stock) / 2 = (180 + 150) / 2 = 165 units.
- Cost of Goods Sold (COGS) = Sales = 300 units sold, with a total value of R27,900.
Inserting the values:
Thus, the stockholding period is approximately 202.5 days.
Step 3
4.2.3 What should Alex say to his brother when dealing with this matter?
Answer
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Inform him that his actions are unethical and can lead to significant consequences for the business, such as loss of reputation and potential legal issues.
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Advise him to cease this damaging activity immediately, emphasizing the importance of integrity in business practices to ensure sustainability.
Step 4
4.2.4 Calculate the closing stock value for gas stoves on 30 April 2021 (using the specific identification method)
Answer
To calculate the closing stock value:
- Identified stock:
- 400 units at R495 each = R198,000
- 200 units at R395 each = R79,000
- Total closing stock value = R198,000 + R79,000 = R277,000.
Thus, the closing stock value for gas stoves is: R277,000.
Step 5
4.2.5 Provide figures to support Alex's opinion regarding gas stoves.
Answer
Alex observes cash flow issues due to:
- Too much cash tied up in stock amounting to R277,000
- The total profit from gas stoves stands at only R54,060, which is low compared to overall turnover.
Therefore, his claim is substantiated by financial figures.
Step 6
4.2.6 Explain TWO points to convince him NOT to discontinue trading in gas stoves.
Answer
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Emphasize that gas stoves could attract more customers due to increasing demand, which may enhance profitability.
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Highlight the potential for strategic marketing initiatives to increase sales, thus alleviating liquidity issues while sustaining the product line.