Draft financial statements show revenue of $106 000 and closing inventory of $2100.
There were 100 items which had cost $10 an item but which were for sale at $6 an item. At the year end these were with a customer on a sale or return basis. These items were treated as having been sold although no sale had been agreed.
What are the values of revenue and inventory when the principle of prudence is applied?

Q: What topic does this question test?

This question tests Accounting Principles and Concepts in A-Level Accounting (syllabus code 9706). It is worth 1 mark.

Q: Which exam paper is this question from?

This question appeared in the Cambridge A-Level Accounting Oct/Nov 2012 examination, Paper 1 Variant 2 (9706_w12_qp_12.pdf).

Question

Draft financial statements show revenue of $106 000 and closing inventory of $2100.
There were 100 items which had cost $10 an item but which were for sale at $6 an item. At the year end these were with a customer on a sale or return basis. These items were treated as having been sold although no sale had been agreed.
What are the values of revenue and inventory when the principle of prudence is applied?

Oracle Prep · Accepted Answer

The correct answer is C: 105 400 2700.

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