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23 

C 

Balance carried down from the previous period shows credits exceed debits and so it is a 

credit balance brought down for the new period. 

24 B   

TRADE RECEIVABLES ACCOUNT 

 

$ 

 

 

$ 

Balance b/d 

100,750 

Cash at bank 

250,225 

Sales  

325,010 Balance 

c/d 

 

175,535 

 

 425,760 

 

 425,760 

25 

B 

False. Sales tax for a registered trader is removed from income and expenses. 

26 

A 

Sales tax can only be charged and reclaimed by businesses if they are registered for sales 

tax. If a business is not registered for sales tax, the sales tax incurred on purchases will be 

charged to the statement of profit or loss as an expense.  

27 A   

SALES TAX CONTROL ACCOUNT 

 

$      

 

$      

Payables (6,750 – 1,250) 

5,500 

Receivables 

 8,000 

Balance c/d (owed to tax 

authorities) 

 2,500 

 

           

 

 8,000 

 

 8,000 

 

 

Balance b/d 

 2,550 

28 

D 

The entries required are 

DR Receivables 

$1,056 

 

CR Sales 

 $880 

 

CR Sales tax 

$176 

Michael is registered for sales tax, so he can charge sales tax and recover the balance 

from the tax authorities.  

29 

D 

Carriage outwards is a selling expense. 

30 

C 

(450 @ 80) + (450 @ 69) = $67,050 

A is incorrect, as it does not include the inventory on hand at the beginning of the period. 

B is incorrect, as it uses the average cost method. D is incorrect, as it uses the LIFO 

method.  

31 

B 

According to FIFO, the first items of inventory to be sold would be included as expenses in 

the statement of profit or loss at the cost of the first items purchased. This cost will be 

lower than the average over the whole period (because of rising prices), so the expense in 

the statement of profit or loss will be lower than average and profit will be higher. 

Likewise closing inventory value: as prices are rising, the items still left in inventory will be 

valued at the higher, later price, which means that inventory value will be higher than the 

average value in the period. 

32 

D 

2 @ $3.00 + 10 @ $3.50 = $41.00 

33 C 

 

Units 

Unit cost 

Total 

Average 

 

 

$ 

$ 

$ 

Opening inventory 

 30 

 2 

 60 

  

5 August purchase 

 50 

 2.40 

 120 

 

     

 80 

 

 180 

 2.25 

10 August issue 

 (40) 

 2.25 

 (90) 

 

 

 40 

 

 90 

 

18 August purchase 

   60 

 2.50 

 150 

 

 

 100 

 

 240 

 2.40 

23 August issue 

 (25) 

 2.40 

  (60) 

 

 

  75 

 

 180 

 

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