QUIZ – AA015 TOPIC 8 ACCOUNTING FOR INVENTORIES (Periodic System)

QUIZ – ACCOUNTING FOR INVENTORIES

(PERIODIC SYSTEM)

 

Syarikat Noah has prepared an inventory record for the month of January 2023 as follows:

The company uses Periodic Inventory System.

 

Required:

 

i. Calculate the ending inventory cost and cost of goods sold using the following methods:

a.         First In First Out (FIFO)

b.        Last In First Out (LIFO)

c.        Weighted Average (round-off to TWO decimal point)

 

ii. Based on the answer in (i), calculate the total gross profit.

 

iii. Assuming you are the accountant of Syarikat Noah, suggest the inventory evaluation method that the company can achieve to:

a.         Minimize tax.

b.        Report highest profit.

ANSWER

Periodic Inventory System

 i. Ending Inventory (units)            = Beginning Inventory + Purchase – Sales

                                                        = 10 + (60 + 150 + 90) – (70 + 20 +30)

                                                        = 310 – 120

                                                        = 190 units

a. FIFO

Cost of ending inventory :

90 x RM10      = RM   900

100 x RM10    = RM1,000                                                     

190                  = RM1,900

 

Cost of Goods Sold            = Beginning inventory + Purchase – Ending inventory

                                            = 80 + (540 + 1,500 + 900) – 1,900

                                            = 3,020 – 1,900

                                            = RM1,120

b. LIFO

Cost of ending inventory :

10 x RM8        = RM     80

60 x RM9        = RM   540

120 x RM10    = RM1,200                                                     

190                  = RM1,820

 

Cost of Goods Sold         = Beginning inventory + Purchase – Ending inventory

                                         = 80 + (540 + 1,500 + 900) – 1,820

                                         = 3,020 – 1,820

                                         = RM1,200

c. WEIGHTED AVERAGE      

Weighted  Average Cost per unit             =  Cost of goods available for sale

                                                                            Units available for sale

        = 80 + (540 + 1,500 + 900)

                           10 + (60 + 150 + 90)

                                                                    = RM3,020     

                                                                        310 unit

                                                                    = RM 9.74

 

Cost of ending inventory        = RM 9.74 x 190

                                                = RM 1,850.60

 

Cost of Goods Sold             = Beginning inventory + Purchase – Ending inventory

                                            = 80 + (540 + 1,500 + 900) – 1,820

                                            = 3,020 – 1,850.60

                                            = RM1,169.40

  

ii.

	FIFO	LIFO	WEIGHTED AVERAGE
SALES (1,400 + 440 + 750)	2,590	2,590	2,590
(-) COST OF GOOD SOLD	(1,120)	(1,200)	(1,169.40)
GROSS PROFIT	1,470	1,390	1,420.60

  

iii.

a.  Minimize tax               - LIFO

b.  Report highest profit   - FIFO

 

 

 

As Salam and Hi everyone... My name is Puan Asmazatul Yusfiziati Binti Mohd Yusof CA(M) or you can call me Madam Fizi. I'm an Accounting lecturer at Negeri Sembilan Matriculation College (KMNS), Kementerian Pendidikan Malaysia. This blog (www.madamfizi.com) was created to share learning materials on the subject of Accounting for Matriculation, Form 6, Foundation, Diploma, Secondary School and related students.