QUESTION 2 (20 marks; 36 minutes)

Ignore VAT

Trendz is a retailer buying and selling clothing. The owner, Mrs Obama has adopted a perpetual system to record inventory and decided to use the First-In First-Out (FIFO) method to assign costs to the inventory sold. On 28 February 2020, the bookkeeper presented Mrs Obama with the following incomplete general ledger accounts for the period 1 January 2020 to 28 February 2020.

Inventory

		Rand	Rand
Jan 01	Balance (700 units @ R7)	4 900
Jan 06	Bank (300 units @ R7.50)	2 250
Feb 07	Bank (300 units @ R8.00)	2 400

Sales

Feb

0

5

Feb 10

Bank

(40

units @

0

R12.00)

Bank (550 units @

R12.00)

4

8

00

6 600

You are required to:

1. Prepare the cost of sales account, given that the FIFO method is used, as it should appear in the general ledger for the period 1 January 2020 to 28 February 2020. (Contra details

must be shown.) (5 marks)

2. Calculate the closing inventory, given that the FIFO method is used, as at 28 February

2020. (4 marks)

c. Calculate the cost of sales and closing inventory if the weighted average method is used to assign costs. (11 marks)