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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:

  1. Freight costs from the supplier to the Bendigo Pottery Ltd.s warehouse is $4 for each garden pot.
  2. 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.
  3. The latest selling price of the garden pots is $84 each.
  4. Bendigo Pottery Ltd prepares monthly reports and applies the periodic (physical) and the weighted average cost (WAC) method.

Required:

  1. Briefly explain why Bendigo Pottery Ltd uses the weighted average cost flow method for its glazed garden pots. [3 marks]

  1. Calculate the value of total closing inventory at 31 January 2020 as provided for in AASB 102. Justify all assumptions and calculations. [8 marks]

  1. 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:

  2. Freight costs from the supplier to the Bendigo Pottery Ltd.s warehouse is $4 for each garden pot.
  3. 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.
  4. The latest selling price of the garden pots is $84 each.
  5. Bendigo Pottery Ltd prepares monthly reports and applies the periodic (physical) and the weighted average cost (WAC) method.
  6. Required:

  7. Briefly explain why Bendigo Pottery Ltd uses the weighted average cost flow method for its glazed garden pots. [3 marks]
  8. Calculate the value of total closing inventory at 31 January 2020 as provided for in AASB 102. Justify all assumptions and calculations. [8 marks]
  9. 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:

  10. Freight costs from the supplier to the Bendigo Pottery Ltd.s warehouse is $4 for each garden pot.
  11. 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.
  12. The latest selling price of the garden pots is $84 each.
  13. Bendigo Pottery Ltd prepares monthly reports and applies the periodic (physical) and the weighted average cost (WAC) method.
  14. Required:

  15. Briefly explain why Bendigo Pottery Ltd uses the weighted average cost flow method for its glazed garden pots. [3 marks]
  16. Calculate the value of total closing inventory at 31 January 2020 as provided for in AASB 102. Justify all assumptions and calculations. [8 marks]
  17. Prepare the general journal entry at 31 January 2020 for any inventory write down. [1 mark]

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