Semester 1 Week 8 Tutorial 6

Question 1

1. Clarkson Ltd, commences trading as a retailer of vehicle parts on 1 January 20X1. During his first year of trading he purchases goods for £145,000. A stockcount as at the year end of 31 December 20X1 reveals inventories with a value of £13,000 are held.

Prepare the journals to account for Clarkson’s inventory in 20X1 and calculate the cost of sales figure.

2. The following year Clarkson makes purchases of £184,000. A stockcount as at 31 December 20X2 reveals inventories with a value of £19,000.

Prepare the journals to account for Clarkson’s inventory in 20X2 and calculate the cost of sales figure.

Answer 1

Question 2

Answer 2

Question 3

Answer 3

Question 4

Answer 4

Question 5

Kermit has a building with a NBV of £180,000 (cost £200,000 and accumulated depreciation £20,000). The NRV of the building is £220,000 while the VU is only £135,000.
Prepare the journal necessary to account for any impairment.

Answer 5

No journal is necessary. Although the VU is lower than the current carrying amount the NRV is higher, there is therefore no impairment.

Question 6

7. Sparrow has an item of machinery with a NBV of £85,000 (cost £100,000, accumulated depreciation £15,000). The VU of the item is £80,000 while the NRV is £78,000.

Prepare the journal necessary to account for the impairment.

Answer 6

Question 7

Answer 7