5SSMN210 Question 2 Allegro Co supplies coal to a local power station. During the financial year 2017, the following transactions took place. Date Purchased/sold Tonnes Jan-1 Feb-3 Apr-15 Apr-23 June-17 Aug-25 Oct-8 Dec-20 Beginning Inventories Purchased Purchased Sold Purchased Sold Sold Sold 4,000 3,000 2,000 4,000 500 1,000 500 3,000 Selling price/ cost per tonne 30 40 45 80 50 85 70 75 a) Suppose that the firm employs the First-In-First-Out (FIFO) method of inventories costing. Calculate the cost of goods sold, closing inventories and gross profit margin. [5 marks] b) Suppose that the firm employs the Last-In-First-Out (LIFO) method of inventories costing. Calculate the cost of goods sold, closing inventories and average inventory turnover period. [5 marks] c) Suppose that a business intends to change its accounting policies regarding inventories for the forthcoming year. It intends to switch from the LIFO to the FIFO method of inventories costing. Prices of goods purchased are known to rise during the forthcoming year. Discuss qualitatively the changes in profit and ending inventories. [5 marks] Total marks for Question 2 [15 Marks]