QUESTION 2 30 MARKS

Bezze Biz is the authorised dealer for heavy-duty expresso machines in the UAE. Bezze Biz buys

the espresso machine for $320 each and sells them for $500 each. On 1 November 2020,

five expresso machines were in the store. Below are the transactions for the month of November.

Date Transaction

November, 1 Bezze Biz purchased 20 expresso machines on credit from Ultima

Pro Corporation with the term: 5/10, n/30, EXW supplier's

warehouse. Bezze Biz paid freight cost of $250.

6 Bezze Biz sold four expresso machines to JJ Costa Coffee on credit

with this term 3/10, n/30. DDP. The freight cost of $100.

8 Bezze Biz returned two of the expresso machines purchased on 1

November and paid Ultima Pro Corporation the amount due on the

expresso machines retained in stock.

11 JJ Costa Coffee returned one of the expresso machines sold on 6

November. The expresso machine was not defective and was

returned to stock.

15 Bezze Biz received payment from JJ Costa Coffee for the amount

due on 6 November sale.

30 A physical inventory count showed only 19 unit of expresso

machines was available in the store. You decided to record the

missing stock as a stock loss expense.

Required:

a) Using a perpetual inventory system, prepare general journal entries to record the transactions.

Ignoring GST.

(24 marks)

b) Explain the differences between perpetual and periodic inventory system.

(6 marks)