Puyu Bertuah Bhd is a merchandising company which newly engaged in trading of product “Tablet 14” and it uses periodic inventory system for maintaining inventory records. During the first quarter of 2023, Puyu Bertuah Bhd sold 12,000 units of product “Tablet 14” for RM120,000. Facts related to its beginning inventory and purchases are as follows:

Jan.	1		Beginning inventory	5,000 units @ RM4.00
	10		Purchases	3,000 units @ RM5.00
Feb.	13		Purchases	8,000 units @ RM4.50
Mar.	5		Purchases	2,000 units @ RM5.00

REQUIRED:

1. Compute the cost of inventory on hand, cost of sales and gross profit for the quarter ended 31 March 2023 using:

• the average cost method
• the FIFO cost method.

(b)Assume that during the physical count of the inventory this year, RM3,000 of merchandise was counted twice. The error was not detected, and the financial statements were prepared. Identify the individual financial statements that would be affected and explain the effect the count error would have on each. (Omit income tax consideration.)

1. Inventories are asset items that a company holds for sale in the ordinary course of business, or goods to be consumed in the production of goods to be sold. Different businesses have different types of inventories. They also have different ways to manage their inventories. The cost flow assumption is the cost formula use in a business such as Specific Identification, First-in, First-out (FIFO) and Weighted Average cost method. Why are cost flow assumptions made to account for merchandise inventory?