Section B: Answer TWO questions from this section.
2. Trevor & Co. has been in operation for two years, retailing domestic furniture. The
purchase and sales information in table represents the company's activities for these
two years.
Sales (units)
Purchases (units)
2021
2022
49,000 @ £78
33,600 @ £94
21,000 @ £53
15,400 @ £58
12,600 @ £44
9,800 @ £50
4,200 @ £60
19,600 @ £40
Required:
a. Using the information contained in the table above, calculate the value of year-end
inventories using FIFO and LIFO methods. Also, prepare profit and loss accounts
showing the gross profit under each of the valuation methods for two years.
(12 marks)
b. What are the reasons to value the inventory at the lower of original cost or the net
realisable value. Discuss.
(13 marks)
(Total 25 marks)