tim Ltd is valuing its closing inventory of finished goods for the year ended 31 December 2019. The following information is relevant;

There was no opening inventory at 1 January 2019 and there are 250,000 units on hand at 31 December 2019. Normal annual production is 750,000 units but in the year ended 31 December 2019, actual production was only 450,000 units because of a labour dispute during the year.

Direct labour costs per unit were 2

Direct material cost per unit was 1

Direct expenses per unit were 1

Standard production overheads for the year was 600,000

Administration overheads for the year was 300,000

Selling expenses per unit are 2

Selling price per unit 7

(a) Calculate the value of inventory to be included in the financial statements of Topflop Ltd for the year ended 31 December 2019.

(b) Draft the journal entry required to record the closing inventory in the financial statements of TIM Ltd for the year ended 31 December 2019.

(c) Draft the accounting policy in respect of inventories to be included in the financial statements of Tim Ltd

for the year ended 31 December 2019.