Thomas Ltd sells one type of surfboard. Its financial year ends on 30 June and it commenced the financial year with 50 surfboards that cost $450 each. Thomas Ltd uses the FIFO method and it had the following transactions throughout the financial year:

i. On 30 July, it acquired 60 surfboards at $400 each.

ii. On 4 August, it paid for the purchase on 30 July and received a discount of 2 per cent for early payment.

iii. On 28 August, it sold 40 surfboards for $700 each; the sales were made for cash.

iv. On 23 September, it acquired 30 surfboards for $420 each, less a trade discount of 4 per cent.

v. On 1 November, it paid for the purchases made on 23 September. Because of the late payment Thomas Ltd was charged a penalty of 1 per cent.

vi. On 24 December, Thomas Ltd sold 15 surfboards for $900 each.

vii. On 1 March, Thomas Ltd purchased another 40 surfboards for $500 each. No trade discount was received.

viii. On 5 March, the amount due for the 1 March purchase was paid and a 2 per cent discount was received for early payment.

ix. On 30 June, it was assessed that there was a downturn in the demand for surfboards and as a result the net realisable value of the surfboards was assessed as being $350 each

. Required:

1. Using the periodic system of accounting, provide the journal entries for the above transactions and determine the balance of cost of goods sold for the year and the value of closing inventory.

2. Using the perpetual system of accounting, provide the journal entries for the above transactions and determine the balance of cost of goods sold for the year and the value of closing inventory.

3. Which inventory method (periodic or perpetual) is preferable and why?