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Howick branch This branch sells Arctic TV sets - NSC Accounting - Question 2 - 2023 - Paper 2
Question 2
Howick branch 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-ou... show full transcript
Worked Solution & Example Answer:Howick branch 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 determine the closing stock value, we first calculate the cost of goods sold (COGS) using FIFO:
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Start with the opening stock and purchases:
- Opening stock: 280 units at R3,900 each.
- Purchases:
- May 2022: 500 units at R3,800 each.
- August 2022: 400 units at R3,950 each.
- September 2022: 600 units at R4,100 each.
- January 2023: 300 units at R4,400 each.
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Calculate total available stock:
- Total units = 280 + 500 + 400 + 600 + 300 = 2080 units.
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Calculate cost of sales (1,550 units sold):
- 280 units (Opening stock) at R3,900 = R1,092,000
- 500 units (May) at R3,800 = R1,900,000
- 400 units (August) at R3,950 = R1,580,000
- 370 units from September at R4,100 = R1,517,000.
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Total cost of sales = R1,092,000 + R1,900,000 + R1,580,000 + R1,517,000 = R6,089,000.
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Closing stock calculation:
- Total value of stock available = R1,092,000 + R1,900,000 + R1,580,000 + R1,500,000 + R1,320,000 = R6,699,000.
- Closing stock value = Total available stock - Cost of sales = R6,699,000 - R6,089,000 = R1,104,000.
Step 2
Calculate the stockholding period (in days) using the closing stock figure
Answer
To find the stockholding period:
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Use the formula: ext{Stockholding Period} = rac{ ext{Closing Stock}}{ ext{Cost of Sales}} imes 365
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Substitute values:
- Closing stock = R1,104,000 and Cost of sales = R7,750,000.
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Calculation: ext{Stockholding Period} = rac{1,104,000}{7,750,000} imes 365 ext{ days} = 67 days.
Thus, the stockholding period is approximately 67 days.