Cutprice Drinks are in business buying and selling canned drinks. Cutprice Drinks use the first in...

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Cutprice Drinks are in business buying and selling canned drinks. Cutprice Drinks use the first in first out (FIFO) method of inventory rotation and perpetual inventory valuation. The following information is available for the year ended 31 December 2022. (1) On 1 January 2022 there were 500 cases of canned drinks costing £10 per case. (2) The purchases and sales of canned drinks for the year ended 31 December 2022 were. Dates 2022 January - March April - June July - September October - December (3) All purchases and sales are on credit. Required (a) Explain the terms: (i) inventory rotation 1000 @ £11 per case 1500 @ £12 per case 2000 @ £13 per case 1000 @ £12 per case (ii) perpetual inventory valuation. Purchases Trade receivables Trade payables Bank overdraft Additional information at 31 December 2022 £9000 £11500 £3 500 Sales (b) Calculate the value of the closing inventory at 31 December 2022. (c) Prepare the Trading Account for the year ended 31 December 2022. 1200 @ £15 per case 1200 @ £16 per case 1500 @ £18 per case 900 @ £20 per case Required (d) Calculate to two decimal places, the: (i) gross profit as a percentage of turnover (ii) rate of inventory turnover (iii) trade payables payment period (in days) (iv) liquid ratio (acid test). In the previous year ended 31 December 2021, the following ratios had been calculated for Cutprice Drinks. Gross profit as a percentage of turnover Rate of inventory turnover Trade payables payment period (in days) Liquid ratio (acid test) 19.58% 9.21 times. 29 days 0.80:1 Required (e) Evaluate the business performance and liquidity of Cutprice Drinks using the ratios calculated in (d) and other information provided. Cutprice Drinks are in business buying and selling canned drinks. Cutprice Drinks use the first in first out (FIFO) method of inventory rotation and perpetual inventory valuation. The following information is available for the year ended 31 December 2022. (1) On 1 January 2022 there were 500 cases of canned drinks costing £10 per case. (2) The purchases and sales of canned drinks for the year ended 31 December 2022 were. Dates 2022 January - March April - June July - September October - December (3) All purchases and sales are on credit. Required (a) Explain the terms: (i) inventory rotation 1000 @ £11 per case 1500 @ £12 per case 2000 @ £13 per case 1000 @ £12 per case (ii) perpetual inventory valuation. Purchases Trade receivables Trade payables Bank overdraft Additional information at 31 December 2022 £9000 £11500 £3 500 Sales (b) Calculate the value of the closing inventory at 31 December 2022. (c) Prepare the Trading Account for the year ended 31 December 2022. 1200 @ £15 per case 1200 @ £16 per case 1500 @ £18 per case 900 @ £20 per case Required (d) Calculate to two decimal places, the: (i) gross profit as a percentage of turnover (ii) rate of inventory turnover (iii) trade payables payment period (in days) (iv) liquid ratio (acid test). In the previous year ended 31 December 2021, the following ratios had been calculated for Cutprice Drinks. Gross profit as a percentage of turnover Rate of inventory turnover Trade payables payment period (in days) Liquid ratio (acid test) 19.58% 9.21 times. 29 days 0.80:1 Required (e) Evaluate the business performance and liquidity of Cutprice Drinks using the ratios calculated in (d) and other information provided.

Answer rating: 100% (QA)

a Inventory rotation refers to the method of managing inventory by rotating or using up the oldest inventory first FIFO first in first out is a common ... View the full answer