(b) John operates a small hardware shop at Abaita-basatu trading centre. He conducted a physical stock count of his hardware shop's closing inventory as at 31 December, 2020 and determined total amount of inventory of Shs 10,640,000 at cost. The following items were included in the total cost of closing inventory: 1. 2. 3. 2 Page 100 bags of cement that were bought at a cost of Shs 25,000 each. The selling price for each bag is Shs 28,000. However, 10 bags were discovered to be in direct contact with the floor and hence can only be sold for Shs 8,500. 5 wheelbarrows that had cost Shs 135,000 each with a selling price of Shs 150,000 each. However, 2 of the wheelbarrows were discovered to have factory defects but could be repaired at a total cost of Shs 4,600 before each could be sold for Shs 138,300. 100 pieces of pavers bought at a total cost of Shs 340,000. The selling price for each piece was Shs 4,000. However 20 pieces where discovered broken and could be sold for Shs 500 each. 4. 5. A special item of equipment that had cost Shs 450,000 with a selling price of Shs 600,000 but due to advancement in technology, it is no longer commonly used. John anticipates that he could sell it for Shs 660,000 only after making significant modifications that would cost Shs 250,000 and rigorous advertising at Shs 100,000. 200 pieces of timber that cost Shs 7,000 per piece with a selling price of Shs 10,000 per piece. However, 40 pieces were damaged during loading. A buyer for the damaged timber was found and an agreement reached. The damaged timber would be sold for Shs 8,000 per piece upon incurring carriage outwards costs of Shs 550,000 in total to transport the damaged batch to the buyer's premises. Required: In accordance to IAS 2: Inventories: (i) Explain any two kinds of inventories that are exempted under IAS 2: Inventories. (2 marks) (ii) Determine the value of closing inventory of John's hardware shop after considering notes (1-5) above and show the journal entries (if any).