Chemist Laboratories Ltd purchases from suppliers and sells to retailers a brand of cosmetic in the month of December 2020. All cosmetic items are identical.

During the month of December 2020, the following inventory transactions took place in the Chemist Laboratories Ltd:

Opening inventory recorded on 1 December 2020; 10 units @$21.50

Purchased on 1 December 2020; 20 units @$19

Sold 5 units on 10 December 2020

Sold 16 units on 12 December 2020

Purchased on 15 December 2020; 15 units @$18

Chemist Laboratories Ltd purchased 35 units, sold 21 units and has 24 units on stock at the end of December. The company uses the perpetual inventory costs flow system to record the inventory.

Required:

1. Compute the costs of sales and ending inventory to record the inventory value under each of the following cost flow method:

First in First out (FIFO) method [8 Marks]

Weighted average cost method [7 Marks]

2. What effect will an asset revaluation have on subsequent periods profits? Explain your answer. [5 Marks]

Chemist Laboratories Ltd purchases from suppliers and sells to retailers a brand of cosmetic in the month of December 2020. All cosmetic items are identical.

During the month of December 2020, the following inventory transactions took place in the Chemist Laboratories Ltd:

Opening inventory recorded on 1 December 2020; 10 units @$21.50

Purchased on 1 December 2020; 20 units @$19

Sold 5 units on 10 December 2020

Sold 16 units on 12 December 2020

Purchased on 15 December 2020; 15 units @$18

Chemist Laboratories Ltd purchased 35 units, sold 21 units and has 24 units on stock at the end of December. The company uses the perpetual inventory costs flow system to record the inventory.

Required:

1. Compute the costs of sales and ending inventory to record the inventory value under each of the following cost flow method:

First in First out (FIFO) method [8 Marks]

Weighted average cost method [7 Marks]

2. What effect will an asset revaluation have on subsequent periods profits? Explain your answer. [5 Marks]