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4 Rani is a trader. Her financial year ends on 31 March.

She provided the following information about her three types of inventory at 31 March 2020.

Inventory Number Cost Selling price Selling expenses

item of units per unit per unit per unit
$ $ $
A 110 17 20 2
B 85 18 19 1
C 90 15 16 2

REQUIRED

(a) Calculate the total value of Rani’s inventory at 31 March 2020.

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Rani later discovered that she had an amount of inventory of item D at 31 March 2020. This
inventory originally cost $1660. She considered this inventory to be obsolete.

REQUIRED

(b) Explain to Rani how the value of the inventory of item D affected the profit for the year ended
31 March 2020.

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© UCLES 2020 0452/21/M/J/20

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(c) Advise Rani whether or not she should stop purchasing item D to avoid having obsolete
inventory in the future. Justify your answer by providing advantages and disadvantages.

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© UCLES 2020 0452/21/M/J/20 [Turn over

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Rani earns advertising income by placing advertising boards in her shop window. The
following details relate to her advertising income.

On 1 April 2019 Rani had received $420 in advance, and $300 was owed to her.

During the year ended 31 March 2020, Rani received cheque payments totalling $6000. She
decided to write off the amount of $300 due to her.

On 31 March 2020 Rani had received $500 in advance, and $400 was owed to her.

REQUIRED

(d) Prepare the advertising income account in the ledger of Rani for the year ended 31 March
2020. Balance the account and bring down the balances on 1 April 2020.

Rani
Advertising income account

Date Details $ Date Details $

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[7]

(e) Explain to Rani the effect on gross profit of recording sales of inventory as advertising income.

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[Total: 20]

© UCLES 2020 0452/21/M/J/20