Question

7(a). State two differences between market forces (barter) and money as a medium of exchange, based on the given extracted books of Lompat Ventures as at December 31, 2022 (Stock at 01/01/22 = ₦37,500; Stock at 31/12/22 = ₦15,000; Goods bought = ₦30,000; Sales = ₦70,000; Wages and salaries = ₦2,500; Rent and rates = ₦3,500; Transportation = ₦2,600; Debtors = ₦100,000; Creditors = ₦50,000; Bank overdraft = ₦60,000; Cash at bank = ₦25,000).
Calculate: (i) net profit; (ii) working capital; (iii) rate of stock turnover.

Accepted Answer

Using the LOMPAT VENTURES figures given:
(i) Net profit = Gross profit − Expenses. Cost of goods sold = Stock(01/01/22) + Goods bought − Stock(31/12/22) = ₦(37,500+30,000-15,000) = ₦52,500. Gross Profit = Sales − Cost of goods sold = ₦70,000−₦52,500 = ₦17,500. Net profit = Gross profit − Expenses = ₦(17,500) − ₦(2,500+3,500+2,600) = ₦17,500−₦8,600 = ₦8,900.
(ii) Working capital = Current assets − Current liabilities = ₦(15,000+100,000+25,000) − ₦(50,000+60,000) = ₦140,000−₦110,000 = ₦30,000.
(iii) Rate of stock turnover = Cost of goods sold ÷ Average stock. Average stock = (Opening stock + Closing stock)/2 = (37,500+15,000)/2 = ₦26,250. Rate of stock turnover = 52,500/26,250 = 2 times.

WAEC Commerce 2023 Theory — Question 7

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