FNS40217 Assessment Question On Certificate IV In Accounting And Bookkeeping

Question 4

Stewart Ember Creations maintains inventory cards to record inventory movements and to help value their inventory. The company uses the perpetual inventory system.

The following transactions for SKU007 have been recorded for the month of June:

All transactions exclude GST.

For questions (b)(i) and (d)(i) 10% GST needs to added to the purchase cost listed for all credit purchases for Accounts Payable valuation purposes.

1/6 Opening balance: 400 units on hand @ $25.00 per unit.
6/6 Purchase on credit of 200 units @ $26.00 per unit; total cost $5,200.
7/6 Sale of 170 units.
9/6 Returned for credit to supplier 20 units (originally purchased on 6/6).
17/6 Sale of 130 units.
23/6 Purchase on credit of 120 units @ $27.00 per unit; total cost $3,240.
28/6 Sale of 160 units.
30/6 Customer returned 10 units in good condition (originally sold on 17/6).
30/6 Stocktake reveals 235 units on hand. This gives rise to a stock variance when compared to the stock card balance.

Required:

1. Complete a stock card using the Weighted Average Cost method (see next pages).
2. (i) Provide journal entries (see next pages) for Purchases. Remember to record the 10% GST.
   (ii) Provide journal entries (see next pages) for Cost of Goods Sold and stock variance.
3. Complete a stock card using the FIFO method (see next pages).
4. (i) Provide journal entries (see next pages) for Purchases. Remember to record the 10% GST.
   (ii) Provide journal entries (see next pages) for Cost of Goods Sold and stock variance.
5. How does a FIFO cost method of inventory valuation differ from a weighted average cost method?