2020 PHS 3E POA EOY P1 Q3

2020 PHS 3E POA EOY P1 Q3

3 Martin, who sells designer lamp shades follows First-In-First-Out inventory management. The following were extracted for the month of July 2020.

1. Inventory on hand comprised 400 units of lamp shades costing $280 each.

2. Purchases of inventory in the month were

Jul 12

300 units at $300 each on credit from D-Sign Light.

      20

100 units at list price of $350 each less 10% discount, paid by cheque.

      27

250 units at $290 each on credit from Sun-Joy.

3. Sales of inventory in the month were

Jul 13

400 units for cash at $560 each.

      28

400 units at $540 each on credit to Home Interior.

REQUIRED

a. Explain the concept of First-In-First-Out.

[1]

b. Prepare the inventory account for the month of July.

[6]

c. Calculate, showing working, the gross profit for the month of July 2020.

[2]

[TOTAL 9]

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