Question

Question 2 [35 Marks]

The transactions for A. Strauss for September were as follows:

Date
1	Opening inventory	200 @ N$ 10
5	Purchase	300 @ N$ 12
16	Purchase	150 @ N$ 15

Date
2	Sales	120 @ N$ 20
10	Sales	200 @ N$ 24
18	Sales	200 @ N$ 25

You are required to:

2.1 Determine the cost of closing inventory using FIFO and                                           [14 Marks]

2.2 Weighted average cost methods on perpetual inventory system.                          [14 Marks]

2.3 Mention 2 advantages of utilizing average cost method.                                          [ 2 Marks]

2.4 Mention three reasons why inventory losses occur                                                   [ 3 Marks]

2.5 Define the term “Net realizable value”.                                                                        [ 2 Marks]

Answer 1

1		Units	Per unit cost	Amount
01-Sep	Beginning inventory	200	10	2000
05-Sep	Purchases	300	12	3600
16-Sep	Purchases	150	15	2250
	Cost of goods available for sale	650		7850
	FIFO
	Ending inventory	Units	Per unit cost	Amount
	23 june purchase	130	15	1950
	Total ending inventory	130		1950
2	Weighted average cost of goods sold
	2 sept sale	1200	(120*10)
	10 sept sales	2316	(11.58*200)
	18 sept sales	2626	(13.13*200)
	Total cost of goods sold	6142
	Cost of goods available for sale	7850
	Cost of goods sold	6142
	Ending inventory	1708