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March 29, 2024, 05:59:05 pm

Author Topic: 14.11 - Cambridge  (Read 736 times)  Share 

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Aqualim

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14.11 - Cambridge
« on: July 08, 2010, 01:59:12 pm »
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Ok so in this exercise there is a 'Sales Discount' included when stock was purchased on credit from another business. In the first question it asks to calculate the cost per unit of stock (one suit), whereby it includes the Sales Discount offered. Which is fair enough.

In question c) it asks for the treatment of the discount, and gives the following answer;

"The discount for early payment affects the amount paid to stock, but it does not affect
the cost incurred when stock is purchased so it is excluded from the valuation of stock in
the stock card
."

Is it just me or does that last sentence contradict what we did for the first and second question? It says that it is excluded from the valuation of stock, yet we included it when calculating the value of stock?

Yitzi_K

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Re: 14.11 - Cambridge
« Reply #1 on: July 08, 2010, 03:23:13 pm »
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When it says 'excluded from the valuation' could it mean the value of the discount is excluded from being subtracted from the total value? I know that sounds a bit convoluted but it could mean like this:

Example: Purchased 10 items at $10 each with a $10 discount for early payment. The discount offer is taken, so the business only pays $90. The stock is still recorded at $10, because the value that would have been subtracted due to the discount is excluded from being taken into account.

A sort of double negative.
« Last Edit: July 09, 2010, 01:28:42 pm by Yitzi_K »
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