he management of Saturn Enterprises currently uses a periodic inventory valuation system based on FIFO assumptions. They have been advised that a perpetual inventory valuation system based on the Average Cost method would provide useful advantages such as smoothing out fluctuations in prices, therefore making it easier to use the data for decision-making. Furthermore, it would be easier to administer than FIFO because there is no need to identify each batch separately. They would like an illustration of the impact of using the AVCO method and provided the following data for an inventory item for 2021 January:

Movements of Stock Item SK24 for the month of January

Details Quantity/Units Unit Cost ($) Total Cost ($)

jan 01 Opening balance 50 40 2 000

Jan 04 Receipts 200 50 10 000

Jan 10 Issues 150

Jan 15 Receipts 300 60 18 000

Jan 20 Issues 300

Jan 25 Receipts 200 46.5 57 000

Jan 30 Issues 240

During the month, Saturn incurred the following additional costs:

i. Utilities $15 750

ii. Wages and salaries $90 000

iii. Insurance $16 000

Note: On January 31, $2 250 was owing for utilities and $2 500 was prepaid for insurance. One unit was sold for $250.

A. Assuming that Saturn Enterprises uses the AVCO method, write up the ledger card showing values of receipts, issues and closing stock for January. (13 marks)

B. Prepare a summary showing a profit or loss made from selling item SK24. (5 marks)

C. Distinguish between perpetual and periodic stocktaking systems