Part A Alpha Ltd’s inventory on 1 January 2024 had a cost of \($150\) 000 and a retail value of \($255\) 500. During the month of January, the company’s purchases of inventory amounted to \($327\) 500, purchase returns totalled \($3\) 500, net purchases had a retail value of \($486\) 000. Total sales for January amounted to \($585\) 000. Ignore GST.

Required

(a) Calculate estimated cost of the inventory at 31 January 2024 using the retail inventory method.

(b) Briefly identify the key assumptions that underlie the validity of this method of estimating the cost of inventory.

Part B On 15 March, the business premises of Omega Ltd was destroyed when an adjacent solvent factory exploded. The insurance company asked the CFO to prove the inventory loss experienced by the explosion. Records salvaged by the offsite backup identified beginning inventory was \($128\) 000, sales up to 15 March totalled \($432\) 800, sales returns were \($2\) 500. The CFO ensured that inventory was marked up to allow a gross profit of 45%. Purchases totalled \($368\) 000, purchase returns were \($3\) 400 and freight inwards amounted to \($5\) 900. Ignore GST.

Required

(a). Calculate the value Omega Ltd should claim for the inventory loss.