Question 3 (12 marks) Bendigo Pottery Ltd is a wholesale distributor of hand-made glazed garden pots to retail stores. All garden pots are identical. Details for January 2020 are shown below. January Opening inventory 2,000 pots - cost $39 each 8 Sales 1,200 pots selling price $80 each 9 Purchases 1,600 pots purchase price $44 each 28 Sales 1,800 pots selling price $84 each 31 Closing inventory 600 pots from the stock stake Additional information: i. Freight costs from the supplier to the Bendigo Pottery Ltd.'s warehouse is $4 for each garden pot. ii. One hundred and eighty (180) of the garden pots on hand at 31 January have imperfections in the glazing and can only be sold for $30 each after handling and repackaging of $10 for each pot. iii. The latest selling price of the garden pots is $84 each. iv. Bendigo Pottery Ltd prepares monthly reports and applies the periodic (physical) and the weighted average cost (WAC) method. Required: (a) Briefly explain why Bendigo Pottery Ltd uses the weighted average cost flow method for its glazed garden pots. [3 marks] (b) Calculate the value of total closing inventory at 31 January 2020 as provided for in AASB 102. Justify all assumptions and calculations. [8 marks] (c) Prepare the general journal entry at 31 January 2020 for any inventory write down. [1 mark] Question 3 (12 marks) Bendigo Pottery Ltd is a wholesale distributor of hand-made glazed garden pots to retail stores. All garden pots are identical. Details for January 2020 are shown below. January Opening inventory 2,000 pots - cost $39 each 8 Sales 1,200 pots selling price $80 each 9 Purchases 1,600 pots purchase price $44 each 28 Sales 1,800 pots selling price $84 each 31 Closing inventory 600 pots from the stock stake Additional information: i. Freight costs from the supplier to the Bendigo Pottery Ltd.'s warehouse is $4 for each garden pot. ii. One hundred and eighty (180) of the garden pots on hand at 31 January have imperfections in the glazing and can only be sold for $30 each after handling and repackaging of $10 for each pot. iii. The latest selling price of the garden pots is $84 each. iv. Bendigo Pottery Ltd prepares monthly reports and applies the periodic (physical) and the weighted average cost (WAC) method. Required: (a) Briefly explain why Bendigo Pottery Ltd uses the weighted average cost flow method for its glazed garden pots. [3 marks] (b) Calculate the value of total closing inventory at 31 January 2020 as provided for in AASB 102. Justify all assumptions and calculations. [8 marks] (c) Prepare the general journal entry at 31 January 2020 for any inventory write down. [1 mark]
