Question

Jim is a self-employed plumber. At 30 June 2020 he had the following items on hand: Pipe and fittings costing $8,000 that he will use on customer jobs and charge out on his invoices. Polyfilla and silicone costing $1,200 that he will use on customer jobs but won’t charge out separately on his invoices. Tools purchased during the year that cost $6,000 - he will use these to complete his work but does not hold them for resale. Assuming that Jim wishes to value his trading stock at cost price on 30 June 2020, what value of closing stock should he choose? O a. $8,000 Ob. $1,200 Oc. $9,200 O d. $15,200 O e. $7,200

Answer 1

Jim should choose c. $9,200 value of closing stock.

The items in hand he has

1) Pipe and fittings $8,000 -- materials that he will use while doing the job. It is treated as stock and valued at cost.

2) Polyfilla and silicone = $1,200 -- Also treated as stock and valued at cost. This is anciliary item which help him in performing the job.

Tools is not for the purpose of re-sale and he uses these tools to performe his plumbing job. So it is treated as Fixed Assets.