On 1 January, L and H each started a business by investing €100 in cash, and then immediately purchasing one widget.
L sold her widget on 3 March for €110, but on 1 April discovered that she needed to pay this to buy another, which she did.
On 30 June this was sold for €120, and a new one bought in July for €120.
On 29 September this was sold for €130, and a replacement purchased on 30 September for €130.
H had been less active and had merely kept his first widget and read the newspaper. Both have decided to adopt 30 September as their accounting date, and come to you for accounting services.
(a) How would the above appear under:
(i) historical cost
(ii) replacement cost.
(b) Which results make more sense, and why?