Lira and Yen are competitors in the shoe retailing business. On 30 June of the previous year both valued their closing stock at market selling value, $10,000 and $20,000 respectively. At 30 June of the current income year, closing stock valued at cost is $6,000 for Lira and $15,000 for Yen; if valued at market selling value it would be $18,000 and $12,000 respectively. If Lira wishes to show a high gross profit for the current income year which basis of valuation should he use? Support your answer with calculations. If Yen disposed of his business and his trading stock on 30 June of the current income year, what would be the effect on his assessable income?

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To determine the basis of valuation that Lira should use to show a higher gross profit ... View the full answer