Lampu Terang Bhd is one of the largest electrical and electronic distributors in Malaysia that was established in 1975s. The company has been listed in the Bursa Malaysia in the beginning of year 2019. Besides conventional way of selling goods via its outlets throughout the nation, Lampu Terang Bhd also sell its goods online through its website. Mr Johan joined the company as a new  Accountant on 30 June 2020. The previous head of accountant has left the company at the end of 2019.

 

PART 1

Currently, Lampu Terang Bhd is employing periodic inventory system in managing and recording its inventory. Mr Johan is not happy with the current system because the latest amount of inventory and cost of goods sold is not available at any point of time. The perpetual system able to verify inventory balances in real-time and it can be used to monitor trends in the usage patterns and alter procurement plans accordingly. However, Mr. Johan is concerned about the upfront costs associated with implementing a new system. Mr Johan is thinking whether it should change its old inventory system to perpetual inventory system.

Lampu Terang Bhd was just recently listed in Bursa Malaysia. Mr Johan have to make sure that the company remain attractive to investors. Therefore, he aimed to report a higher amount of profit. Mr. Johan also noticed that the purchase cost for merchandise is keep increasing and he believed that this scenario will affect the amount of profit for LampuTerang Bhd. He also realised that the choice of inventory cost flow assumption will also affect the company’s profit. Mr Johawas in a dilemma whether it should change its inventory cost flow assumptions from average cost basis to First-in-First-out (FIFO). Mr Johan asked Miss Meena to advise him on that matter.

The following information has been extracted from the records of Lampu Terang Bhd about one of its new products; Moderna Vacuum for the month of January 2020.

1 January	Purchased 5,000 units from a supplier at the total cost of RM150,000. The purchase was made by cash.
3 January	Sold 2,500 units to Hotel Meera Sdn Bhd by credit at a price of RM45 per unit.
11 January	Purchased 2,000 units from a BangGo Enterperise at a price of RM32 per unit. The purchase was made by cash.
20 January	Received full payment from Hotel Meera Sdn Bhd.
23 January	Sold 4,000 units to CleaningKu Bhd by credit at a price of RM45.
28 January	Purchased 1,500 units from VacuumTop Sdn Bhd at the total cost of RM52,500. The credit terms given was 2/10, n/45.

 

PART 1

• Identify the issues that is facing by the accountant of Lampu Terang Bhd (CTPS)
• Based on the issue identified, how does the accountant of Lampu Terang Bhd could resolve it? (CTPS)
• If you are Miss Meena, suggest the suitable cost flow assumption to be applied by Lampu Terang Bhd. (CTPS)
• Prepare the journal entry for the month of January 2020 using Periodic and perpetual inventory system. Assume that the company changed its inventory cost flow assumptions from average method to FIFO method