QUESTION 2 (30 marks)

BGS is a retailer buying and selling leather handbags. The following information relates to the month ended 31 October 2022.

Date		No. of units	Cost per unit
1 Oct	Opening inventory	45	R80.24
5 Oct	Credit purchase	75	R88.50
8 Oct	Purchase return	8	R88.50
25 Oct	Credit purchase	38	R82.60

The only sale during the month of October 2022 was a sale of 62 units on 15 October 2022.

REQUIRED:

2.1 Determine the cost of closing inventory on the FIFO cost allocation method.

(4 marks)

2.2 Prepare the cost of sales and inventory accounts in the General Ledger of BSG for the month ended 31 October 2022, using the FIFO cost allocation method, assuming the periodic recording system was used. (Adjusting and closing entries should be included.)

(10 marks)

2.3 Prepare the cost of sales and inventory accounts in the General Ledger of BSG for the month ended 31 October 2022, using the FIFO cost allocation method, assuming the perpetual recording system was used. (Adjust and closing entries should be included.)

(10 marks)

2.4 Assume that the inventory on hand on 31 October 2022 had a net realisable value of R82.60 per unit. Briefly explain the effect that this will have on the value of the inventory in the records of BSG.