Question

Q8.

(Trading account, average cost)

Clyde Wishbone breeds and sells sheep. During the 2017/18 year records disclosed the following:

	Quantity	Value ($)
Sheep on Hand – 30 June 2017	8,200	47,900
Purchases	500	9,200
Natural Increase	2,900
Sales	4,300	92,400
Rations	100
Deaths	300

Clyde chooses to use the prescribed value for natural increase and average cost for rations and closing stock.

Required:

Prepare the average cost calculations and the trading account for the 2017/18 tax year.

Average Cost Calculations
	Qty. of Sheep	$
Opening Stock		$
Purchases		$
Natural Increase @ Prescribed Value		$
Total		$
Average Cost of One Sheep		$
Average Cost of Rations	Qty Sheep for Rations	$
Average Cost of Closing Stock	Qty Sheep at Closing Stock	$

Sheep Trading Account
	Qty.	$		Qty.	$
Opening Stock			Sales
Purchases			Rations
Natural Increase			Deaths
Gross Profit			Closing Stock

Answer 1

SOLUTION:

AVERAGE COST CALCULATION:

Particulars	Qty. of sheep	$
Opening Stock	8200	47900
Purchases	500	9200
Natural Increase @ prescribed value	2900	0
Total	11600	57100
Average cost of one sheep (57100/11600)	4.92
Average cost of Rations (100*4.92)	100	492
Average cost of Closing stock (as calculated below)(6900*4.92)	6900	33948

SHEEP TRADING ACCOUNT

Particulars	Q	$	Particulars	Q	$
Opening Stock	8200	47900	Sales	4300	92400
Purchases	500	9200	Ration	100	492
Natural Increase	2900	0	Deaths	300	0
Gross Profit		69740	Closing Stock	6900	33948
Total	11600	126840		11600	126840