Martha started business on 1 October 2010 buying and selling memory sticks. Each year in October she placed an order for memory sticks with the Mystic Memory Stick Company. During her first four years of trading, Martha’s purchases and sales of memory sticks were as follows:

Year ended 30 September Purchases Sales 2011 120,000 @ 70p 100,000 2012 120,000 @ 90p 100,000 2013 120,000 @ £1.10 140,000 2014 120,000 @ £1.30 100,000

(a) Calculate the value of inventory on 30 September 2014, using each of the following inventory valuation methods:
(i) FIFO (first in, first out)
(ii) LIFO (last in, first out)
(iii) AVCO (average cost – perpetual method).

(b) Explain why, under accounting standards, FIFO can be used, but LIFO is not permitted.