EXERCISE

The company had 2000 units of a product at the end of 2019. These items were bought at K2 per unit. However, these items got damaged and a total of K5,000 have to be spent for them to be sold at K4 each.

The following transactions took place during the period of January 2020 to June 2020

January Sold 1,500 units at K4.00 each.

February received 10,000 units at K3.125 each less 20% trade discount

March Sold 8,000 units at K4.00 each less 5% cash discount

April Received 15,000 units at K2.70 each net of 20% trade discount

May Received 6,500 units at K2.70 each net of 20% trade discount.

June Sold 21,800 units at K4.00 each.

June Returned 200 units to the supplier who supplied the goods in May

Required:

1. Calculate the inventory valuation at 30^th June 2020 using

1. FIFO Method (5 Marks)
2. LIFO method (5 Marks)
3. Average Cost Method. (5 Marks)

(b) Calculate the trading profit for the period under review using the above three methods of valuation of opening and closing inventory.(5 Marks)