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JAMB Principles of Accounts 2002 Question 31

Question 31

Branch Accounts

Given that ⅓ of the ₦6000 stock held by a branch is purchased from outsiders. If goods are invoiced to branch at 25% on cost, the provision for unrealized profit is

  1. A.₦1000.00
  2. B.₦333.33
  3. C.₦666.66
  4. D.₦800.00.
Show the answer and explanation

Answer: D (₦800.00.)

Explanation

Stock from head office = ⅔ × 6 000 = 4 000 at invoice price. Unrealised profit = 4 000 × 25/125 = ₦800.