Question 1: Inventories

The following inventory information relates to Cheap Retailers Limited for the month ending 31 January 2023. The company uses a periodic inventory system to record the inventory.

	Number of Units	Unit Price
Opening inventory at 1 Jan 2023	2,000	@ $20
Purchases on 11 Jan 2023	6,000	@ $32
Purchases on 26 Jan 2023	8,000	@ $35

During the month of January, the company sold 14,000 units.

Required:

1. Calculate the cost of sales and closing inventory amounts for the month ending 31 January 2023 using:

• The first in first out (FIFO) method
• The weighted average cost (WAC) method.

2. Assume that the company follows the FIFO method to calculate its inventories. As at 31 January 2023, the company has estimated the net selling price of a unit as $30.

Required

Calculate value of inventories as at 31 January 2023. Explain your answer using the relevant principle in the accounting standard, NZ IAS 2. Also prepare any adjusting journal entries required on 31 January 2023.

Thank you!