Here is the post-closing trial balance of Novice Radio (who specialise in two-way radio equipment) as at 31 December 20x7:

Novice Radio trades exclusively in expensive high-quality two-way radios.

Transactions (in chronological order) during the 20x8 financial year:

1. Sold eight of the radios on hand, at the beginning of the period, for R4 800 cash.

2. Bought five of model HJ2 at R320 each and 8 of model XL3 for R400 each.

3. Sold five of model HJ2 at R450 each and one of model XL3 for R600 on credit.

4. Bought four of model HJ2 at R340 each cash and paid an extra R40 for carriage inwards.

5. Two of the model HJ2 radios sold above were returned by dissatisfied customers.
– The owner kept one radio for his own personal use and returned the other, which was defective, to the supplier and the latter gave a cash refund.
– Both radios had been part of the beginning of period inventory on hand.

6. Bought three of model AB4 at R250 each on credit.

Additional information:
1 Novice Radio accounts for inventory using a perpetual recording system and uses the first-in-first-out (FIFO) method of valuation.

2 The demand for model HJ2 dropped towards the end of 20x8 because of the introduction of the more sophisticated AB4 model. On 31 December 20x8, the price of model HJ2 was R330.
3 A physical inventory count of radios on hand on 31 December 20x8 showed:

4 The AB4 models were not delivered until mid-January 20x9.

You are required to:

1. Entries in the general journal to record:

a. Transactions 1 to 6.

b. Any end of period adjustments that may be necessary.

c. A composite closing entry.

2. Draft the inventory account in the general ledger.

3. Show how inventory should be disclosed in the business’s statement of financial position as at 31 December 20x8.

Transcribed Image Text:

Novice Radio POST-CLOSING TRIAL BALANCE AS AT 31 DECEMBER 20x7 Debit Details Capital Inventory 10 of model HJ2 Bank Fol. B1 B2 B3 4 000 00 5 000 00 9 000 00 Credit 9 000 00 9 000 00