Demetris is a trader, buying and selling goods on credit. The following information was available on 31 March 2014. Revenue $300000 Inventory 31 March 2014 $50000 Purchases $170000 Capital $100000 Bank $5000 Dr Trade payables $60000 Trade receivables $11000 Gross profit/sales 20% REQUIRED

1. (a)(i)Calculate the: Cost of goods sold.[2]
2. (a)(ii)Inventory at 1 April 2013.[3]
3. (b)Suggest two possible effects of holding too much inventory. 1 2..[2]
4. (c)(i)Calculate, to two decimal places, the: Working capital ratio (current ratio)[3]
5. (c)(ii)Quick ratio (acid test ratio)[3]
6. (d)Comment upon the sufficiency of the working capital ratio (current ratio).[2]
7. (e)During the year ended 31 March 2014, Demetris took the following actions. 1 Repaid a $40000 long term bank loan. 2 Purchased $20000 of non-current assets on credit. 3 Sold inventory for $20000 on credit (cost $15000). REQUIRED Complete the following table showing the effect on the current assets, current liabilities and the working capital ratio (current ratio) for each of the actions 1 to 3 above. The first item has been completed as an example. Current assets Current liabilities Working capital ratio (current ratio) 1 Repaid a $40000 long term bank loan. Decreased $40000 No effect Decreased 2 Purchased $20000 of non-current assets on credit. 3 Sold inventory for $20000 on credit (cost $15 000). [6]