2020 BGSS 3N POA EOY P2 Q2
$ | |
Purchase price of sandals | 9 000 |
Insurance for shipment of sandals | 120 |
Import tax on sandals | 630 |
Wages for salesperson to promote sandals | 2 900 |
REQUIRED
a. Calculate the cost of inventory purchased.
[2]
On 1 August 2020, Inari Trading had 20 units of inventory valued at $6 000. During the month of August, the following purchases took place.
Purchases (by cheque) | |
Aug 8 | Bought 20 units at $3 500 |
Aug 13 | Bought 20 units at $5 000 |
Aug 23 | Bought 40 units at $10 500 |
Sales | |
Aug 17 | Sold 40 units for $40 600 |
Aug 29 | Sold 20 units for $25 300 |
The business records inventory using the First-In-First-Out (FIFO) method.
REQUIRED
b. Calculate the cost of sales for the month of August 2020.
[1]
c. Prepare the inventory account for the month of August 2020. Bring down the balance to the next month.
[6]
On 30 September 2020, the business had an ending inventory valued at $4 320. Due to flash floods, the packaging of the remaining goods was damaged. The damage amounted to $800.
REQUIRED
d. State the valuation rule for inventory.
[1]
e. Prepare the journal entry to account for the goods destroyed. A narration is not required.
[2]
f. State the effect on the following items for the month of September after the adjustment done in (e).
[2]
ii. profit
[TOTAL 14]
Cost of inventory purchased = 9 000 + 120 + 630
= $9 750
Cost of sales = 6000 + 3500 + 5000
= $14 500
Inventory is valued at the lower of cost and net realisable value.
(i) Current assets will decrease by $800.
(ii) Profit will decrease by $800.