Brian Blue operates a small retail business, trading as Blue Monday. The following are balances that have been extracted from the general ledger on 31 December 20X2:

||Particulars||C

|Inventory at 31 December 20X1|55,200

|Purchases|148,800

|Duty on purchases|37,200

|Rail-age inwards|50,400

|Sales|288,000

Goods with an invoice price of C5 040 are still en-route from Orkney, a small mining town, and are expected to be delivered very soon. A non-refundable duty of C1 260 plus an amount of C1 680 for rail-age has already been paid. Ownership of these goods passed to Brian before 31 December 20X2 and these costs have already been included in the above balances.

The stock count carries out on 31 December 20X2 showed inventory on hand with a total cost of C62 040.

Brian Blue is not a VAT vendor.

Required:

1. Identify what inventory system had been applied by this business and explain your answer.
2. Prepare all journal entries necessary including closing entries.
3. Show all journals posted in the cost of sales account and trading accounts.
4. Show how the above information will be presented in the statement of financial position as of 31 December 20X2 and in the statement of profit or loss for the year ended 31 December 20X2.

Please do not copy from Chegg otherwise I have to report the answer. Explain the answer throughly by showing each step of the calculation.

Answer rating: 100% (QA)

Answer The inventory ... View the full answer