The following information has been extracted from the records of Budget Retail Supplies Pty Ltd about one of its popular products. Budget Retail Supplies Pty Ltd uses the perpetual inventory system. Its annual reporting date is 31 December. Ignore GST.

		No. of units	Unit cost
2023
Jan. 1	Beginning balance	900	$ 7.00
Jan. 6	Purchases	400	7.05
Feb. 5	Sales @ $12 per unit	1000
Mar. 17	Purchases	1020	7.35
May-04	Sales @ $12.10 per unit	700
Jun. 26	Purchases	8400	7.50
Aug. 11	Sales @ $13.25 per unit	1780
Sept. 11	Sales @ $13.50 per unit	3500
Oct. 6	Purchases	500	8.00
Dec. 11	Sales @ $15 per unit	3100

Required

A. Calculate the cost of inventory on hand at 31 December 2023 and the cost of sales for the year ended 31 December 2023, assuming:

• the FIFO cost flow assumption
• moving average cost flow assumption (round average unit costs to the nearest cent, and total cost amounts to the nearest dollar).
• B. Which cost flow method results in (1) the higher inventory amount for the statement of financial position and (2) the higher cost of sales for the statement of profit or loss? And why? C. If the ending inventory is understated because of an error, what is the effect on profit in that reporting year and in the next reporting year? What is the effect on the value of assets as reported in the Statement of Financial Position at the end of each year?