QUESTION 4 (12 marks)

Peppy Traders (Pty) Ltd is a company located in Johannesburg, that imports clothing from China. The company has a 31 December financial year-end.

You have been provided with the following information regarding the companys inventory for 31 December 2022:

The physical inventory count on 31 December 2022 indicated closing inventory with a

cost of R55 000.

Included in the closing inventory were damaged items with a cost price of R5 000. The

damaged inventory could be sold for R5 100 if R450 was spent on repairs. Peppy Traders (Pty) Ltd received the invoice, from Bob the builder Ltd, prior to year-end for the repairs of R450.

Peppy Traders (Pty) Ltd also sent inventory with a selling price of R4 800 to a client in Cape Town. The terms of the contract indicate FOB destination. The inventory left Johannesburg on the 31st of December 2022 and arrived in Cape Town on the 2nd of January 2023. This inventory is not included in the R55 000 closing balance.

Additional information:

Peppy Traders (Pty) Ltd uses the perpetual system for recording inventory.

Peppy Traders (Pty) Ltd uses a constant mark-up of 50% on cost.

Peppy Traders (Pty) Ltd uses the cost model for the measurement of equipment.

67 HFAC130-1-Jan-June2023-FA1-LVN-V2-20230203

4.1 With reference to the information given, calculate the cost of Peppy Traders (Pty) Ltds closing inventory at 31 December 2022.

(5 marks)

4.2 Prepare the general journal entries to account for all the transactions relating to Peppy Traders (Pty) Ltds inventory for the 31 December 2022 financial year-end. Journal dates and narrations are not required.

(5 marks)

4.3 Prepare an extract of the statement of financial position of Peppy Traders (Pty) Ltd as at 31 December 2022 to display the final balance of inventory.

(2 marks) (please only answer if you know how to do each question, the last question I posted was answered using chat gpt as the amounts did not add up)