Page 83 - Accountancy_F5

The entire project was financed by a bank loan. Interest, advertising and other expenses
totalled TZS 1,000,000. Loss of TZS 70,000 was discovered. It was also discovered
by a consultant that Edward used FIFO method for valuing unsold inventory whereas
Hamdani used weighted average cost method for the same purpose.

Required: Prepare separate statements of profit or loss for the two brothers clearly
FOR ONLINE READING ONLY
showing your computations of closing inventory in each case.
6. Luqman Vision is a business dealing with ladies’ outfits. On 1 June 2024 the entire
st
inventory of Luqman Vision was destroyed by fire. Given below is the statement
of profit or loss for the year ended 31 December 2023:
st
LANGUAGE EDITING
Statement of profit or loss for the year ended 31 December 2023
st
Details TZS TZS
”000” ”000”
Net sales 595,500
Less: Cost of sales Opening inventory 183,750
Add: Purchases 472,500
Cost of goods available for sale 656,250
Less: Closing inventory 210,000 446,250
Gross profit 149,250

The following information were also available:

(a) The figure of sales doesn’t include sales of TZS 19,500,000 made on 31 st
December 2023 which was recorded in the following day by mistake.
(b) TZS 15,000,000 cost of sales on 31 December 2023 was included in the closing
st
inventory by error.

(c) Records of salvage inventory from fire revealed that trade transactions from 31
st
December 2023 to the day the fire occurred were; Net sales TZS 272,250,000
including TZS 19,500,000 for sales of 31 December 2023 that were recorded
st
in the sales figure of 1 January 2024. Net purchases were TZS 162,000,000.
st
Required: As an assistant accountant for Luqman Vision, compute the amount of
insurance compensation using gross profit method.

7. Sila Corporation insured its inventory for TZS 1,050,000. The company’s store
caught fire on 10 June 2024 and most of the inventory and accounting records
th
were destroyed. After a thorough investigation, the following information were
obtained.

Student’s Book Form Five
70

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