Question
Bendigo Pottery Ltd is a wholesale distributor of hand-made glazed garden pots to retail stores. All garden pots are identical. Details for January 2020 are
Bendigo Pottery Ltd is a wholesale distributor of hand-made glazed garden pots to retail stores. All garden pots are identical. Details for January 2020 are shown below.
January | 1 | Opening inventory | 2,000 pots cost $39 each |
| 8 | Sales | 1,200 pots selling price $80 each |
| 9 | Purchases | 1,600 pots purchase price $44 each |
| 28 | Sales | 1,800 pots selling price $84 each |
| 31 | Closing inventory | 600 pots from the stock stake |
Additional information:
- Freight costs from the supplier to the Bendigo Pottery Ltd.s warehouse is $4 for each garden pot.
- One hundred and eighty (180) of the garden pots on hand at 31 January have imperfections in the glazing and can only be sold for $30 each after handling and repackaging of $10 for each pot.
- The latest selling price of the garden pots is $84 each.
- Bendigo Pottery Ltd prepares monthly reports and applies the periodic (physical) and the weighted average cost (WAC) method.
Required:
- Briefly explain why Bendigo Pottery Ltd uses the weighted average cost flow method for its glazed garden pots. [3 marks]
- Calculate the value of total closing inventory at 31 January 2020 as provided for in AASB 102. Justify all assumptions and calculations. [8 marks]
- Prepare the general journal entry at 31 January 2020 for any inventory write down. [1 mark]
Bendigo Pottery Ltd is a wholesale distributor of hand-made glazed garden pots to retail stores. All garden pots are identical. Details for January 2020 are shown below.
January
1
Opening inventory
2,000 pots cost $39 each
8
Sales
1,200 pots selling price $80 each
9
Purchases
1,600 pots purchase price $44 each
28
Sales
1,800 pots selling price $84 each
31
Closing inventory
600 pots from the stock stake
Additional information:
- Freight costs from the supplier to the Bendigo Pottery Ltd.s warehouse is $4 for each garden pot.
- One hundred and eighty (180) of the garden pots on hand at 31 January have imperfections in the glazing and can only be sold for $30 each after handling and repackaging of $10 for each pot.
- The latest selling price of the garden pots is $84 each.
- Bendigo Pottery Ltd prepares monthly reports and applies the periodic (physical) and the weighted average cost (WAC) method.
-
Required:
- Briefly explain why Bendigo Pottery Ltd uses the weighted average cost flow method for its glazed garden pots. [3 marks]
-
- Calculate the value of total closing inventory at 31 January 2020 as provided for in AASB 102. Justify all assumptions and calculations. [8 marks]
-
- Prepare the general journal entry at 31 January 2020 for any inventory write down. [1 mark]
Bendigo Pottery Ltd is a wholesale distributor of hand-made glazed garden pots to retail stores. All garden pots are identical. Details for January 2020 are shown below.
January
1
Opening inventory
2,000 pots cost $39 each
8
Sales
1,200 pots selling price $80 each
9
Purchases
1,600 pots purchase price $44 each
28
Sales
1,800 pots selling price $84 each
31
Closing inventory
600 pots from the stock stake
Additional information:
- Freight costs from the supplier to the Bendigo Pottery Ltd.s warehouse is $4 for each garden pot.
- One hundred and eighty (180) of the garden pots on hand at 31 January have imperfections in the glazing and can only be sold for $30 each after handling and repackaging of $10 for each pot.
- The latest selling price of the garden pots is $84 each.
- Bendigo Pottery Ltd prepares monthly reports and applies the periodic (physical) and the weighted average cost (WAC) method.
-
Required:
- Briefly explain why Bendigo Pottery Ltd uses the weighted average cost flow method for its glazed garden pots. [3 marks]
-
- Calculate the value of total closing inventory at 31 January 2020 as provided for in AASB 102. Justify all assumptions and calculations. [8 marks]
-
- Prepare the general journal entry at 31 January 2020 for any inventory write down. [1 mark]
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