Explain stock valuation, Cost Accounting

G. Mills was appointed a local agent for the High Power Mobile Workshop Bolt (HPMW-B) on 1 April 2009. The HPMW-B is manufactured by Mobile Equipment Ltd (MEL). The company charges its agents an annual service charge of $10,000 payable in advance each year on 1 April. In addition, agents pay MEL a commission of 5% of the gross profit on all sales.

During the past two years the demand for HPMW-B increased. At the same time, MEL had some raw material shortages and production difficulties. This led to a number of price increases in the manufacturer's price of the HPMW-B. However, the agents decided it would be unwise to pass these increased costs to their customers. Accordingly, throughout 2009 and 2010, a selling price of $52,000 per HPMW-B was maintained by the agents.

G. Mills' transactions up to 31 December 2010 are summarised as follows:





3 @ $38,000






2 @ $40,000






4 @ $40,500















5 @ $30,000 (note 1)







1 (note 2)


2 @ $41,500









1.   This was the purchases by G. Mills of the stock of an agent who had been declared bankrupt.

2.  On July 1 2010, G. Mills decided to use one of the HPMW-B as a display facility. Depreciation is to be provided on the Workshop used as a display facility at the rate of 20% per annum on cost. The Workshop will have a nil estimated residual value.

G. Mills' expenses, other than those payable to MEL, are at the rate of $15,000 per annum.


(b)   Prepare G. Mills' Income Statements using the LIFO and the FIFO methods of stock valuation, for

   i.  The period 1 April 2009 to 31 December 2009

   ii.  The year ended 31 December 2010

(c)    State and explain two reasons why stock valuation is important in accounting.

Posted Date: 2/26/2013 7:12:25 AM | Location : United States

Related Discussions:- Explain stock valuation, Assignment Help, Ask Question on Explain stock valuation, Get Answer, Expert's Help, Explain stock valuation Discussions

Write discussion on Explain stock valuation
Your posts are moderated
Related Questions
Shirley and Ken are in partnership, trading in the construction industry. The year end for the partnership business is 30 June. You are the Assistant Accountant and have been as

Cost Book-Keeping In cost account accounts, extensive employ is made of control accounts that are based in the similar principles as those utilized in financial accounts.  Two

The following is a summary of a cash book for the year ended 31 April 2012 Payments                              $              Receipts                                    $

Q. What is the amount of compensation expense recognized for stock options for each year of the vesting period, given the following information?  A firm awards stock options at-

SALES REVENUE VARIANCE (SRV) The word 'Sales Variance' is indicated by the expression 'operating profit variance due to sales' by ICMA.  It is described as 'the difference betw

Bottoms Up company produces high quality sports equipment. the companie''s racket division manufactures three tennis rackets- the Standard, Deluxe and the Pro that are widely used

What do you mean by differential costing ? How it differ from marginal costing ? explain its practical application with examples?

High - Low Method of Cost Estimation Now, cost estimation is based upon the relationship between past level and past cost of activity. Variable cost is based on the relationsh

Describe the concept of full cost recovery with illustrative examples.