Spriggly Ltd recently established a service station. They have decided to use a perpetual inventory system, based on FIFO. The following transactions occurred during the month of October. Oct 1 Spriggly Ltd commenced business with $20 000 cash.

The price index was 100

Oct 2 Spriggly Ltd used cash to buy shop fittings costing $3 000. The fittings have a five year useful life. Oct 3 Spriggly Ltd used cash to buy 8 000 litres of fuel at $2.00 per litre. Oct 15 Spriggly Ltd sold 5 000 litres of fuel for cash Selling price $2.25, Replacement cost $2.10

Oct 31 The fuel has a selling price of $2.30 and a replacement cost of $2.20. The shop fittings have a selling price of $2 800 and a replacement cost of $3 600. The price index is 105.

Required Show all calculations as partial marks will be awarded for correct working. Under current cost accounting, i. calculate profit for the month of October, using a financial capital concept. ii. explain why it is useful to calculate realised holding gains.