Question

6.ABC Equipment Limited has made the following inventory purchases during the first quarter of 2019.

Period # of Units Price per Unit (in '000s)
January 108 GBP 45
February 94 GBP 48
March 86 GBP 46
During the quarter, the company sold 200 units at GBP 50,000 per unit. The company has 88 units at the end of the quarter and specifically identifies that 86 were those procured in the month of March and balance were purchased in the month of January 2019. If the company follows the weighted average cost method, the gross profit of the company during the 1st quarter of 2019 is closest to (in thousands):

Select one:
a. GBP 744
b. GBP 719
c. GBP 849

4.Red Corp is a firm based in Washington reporting under US GAAP. Which format of the balance sheet is Red Corp. required to present?

Select one:
a. Either the classified balance sheet format or the liquidity-based balance sheet format
b. Liquidity-based balance sheet format
c. Classified balance sheet format

3.Which of the following expenses are deducted from gross profit to obtain operating profit for non-financial companies?

I. Selling expenses

II. Administrative expenses

III. Research and development expenses

IV. Interest expenses

Select one:
a. I, II & III only
b. I, II & IV only
c. I & II only

Answer 1

Sales		10000
Cost of goods sold
Purchases
108@45	4860
94@48	4512
86@46	3956
Total	13328
Less closing stock
88 units @46.2778 (weighted average cost)	4072
		9256
Gross profit		744
46.2778 = 13,328 / (108 + 94 + 86) (total purchase cost / total quantity)

Answer in a GBP 744

2) a. Either the classified balance sheet format or the liquidity-based balance sheet format

3) a. I, II & III only (operating profit is also known as EBIT - earnings before interest and tax)