BKAR1013 FINANCIAL ACCOUNTING AND REPORTING I (A221)

MINI CASE 4:

INVENTORY

DUE DATE: 11 NOVEMBER 2022, SUNDAY

Guidelines for submission:

1) Please answer all questions.

2) Please write your name, matric number, group on the header and page number on
the bottom of your answer document.

3) The mini case is an individual task, however discussion is allowed, but copying other
student’s answer is forbidden.

4) Your answer should be handwritten and subsequently scanned with a scanner or

mobile scanner apps in a combined PDF file. The scanned document must be clear,
easily readable and complete. Photo is not allowed.

5) Submit your scanned answer via Online Learning portal →

within the allotted time and period, before 12.00 mid night 11 November 2022
(MYT). Only one submission will be accepted.

QUESTION 1
  
Aura Marble Bhd, which is located in Shah Alam, Selangor selling marble dining table. The
inventory recording system for Aura Marble Bhd is periodic inventory system. The
company’s financial year-end is on 31 December 2021.  
 
The following are transactions of Aura Marble Bhd during the year 2021: 
 
Date  Transactions 
10 January  Purchased 70 units of dining table from Kemunting Furniture Sdn Bhd for
RM750 per unit. 
25 March  Sold 100 units of dining table to Kokos Sdn Bhd for RM1,200 per unit.  
 
20 May   Purchased 50 units of dining table from Kemunting Furniture Sdn Bhd for
RM600 per unit. 
 
15 August  Purchased 300 units of dining table from Syarikat Perabut Selatan for RM825
per unit. 
 
20 August  Sold 150 units of dining table to Syarikat Tanjung for RM960 per unit. 
 
1 October  Purchased 200 units of dining table from Westo Furniture Sdn Bhd for
RM900 per unit. 
 
15 October  Sold 150 units of dining table to Kolumpo Sdn Bhd for RM1,230 per unit. 
 
20 October  Sold 50 units of dining table to Syarikat Wong for RM1,350 per unit. 
 
 
Additional information: 
 
1. As at 1 January 2021, 50 units of marble dining table at the cost price of RM540
remain in the warehouse.   
2. Operating expenses incurred for the year was RM15,000. 
3. Tax expense for the current year was RM5,000. 
 
REQUIRED: 
 
a. Calculate the ending inventory for marble dining table using FIFO method. 
 
b. Prepare the Statement of Profit or Loss and Other Comprehensive Income of Aura
Marble Bhd for the year ended 31 December 2021. 
 
c. It is expected that the purchase price of inventory will keep increasing. If Aura Marble
Bhd wants to minimize the income in order to pay less tax, suggest with explanation,
which inventory cost flow assumptions (FIFO or average cost) that is more relevant. 

QUESTION 2
Jitra Bhd (JB) sells health care product. Following is the information for its inventory for the
month of December 2021.

Date Transactions
1 Dec Inventory on hand consists of 500 units at RM14 each.

8 Dec Sold merchandise for RM9,000 (300 units @ RM30), f.o.b. destination,
to a customer in Ampang, Kuala Lumpur. The customer was scheduled
to receive the merchandise on 9 December 2021.

10 Dec Purchased merchandise costing RM10,500 (700 units @ RM15) from a

vendor, f.o.b. shipping point, 2/10, n/30. The merchandise was received
on 14 December 2021. The transportation cost was RM140.

15 Dec Purchased merchandise costing RM6,200 (400 units @ RM15.50) from

a vendor, f.o.b. destination, 2/10, n/30. The merchandise was received
on 19 December 2021. The transportation cost was RM80.

20 Dec Sold merchandise for RM15,000 (500 units @ RM30), f.o.b. shipping
point, to a customer in Sungai Petani, Kedah. The customer was
scheduled to receive the merchandise on 22 December 2021.

27 Dec Purchased merchandise costing RM16,000 (1,000 units @ RM16) from

a vendor, f.o.b. destination, 2/10, n/30. The merchandise was received
on 2 January 2022. The transportation cost was RM200.

JB uses perpetual inventory system for maintaining inventory records. The policy of the
company is to record purchases using the net method.

REQUIRED:
(Round the answer to two (2) decimal points)

(a) Prepare a schedule to calculate the cost of inventory on hand at 31 December 2021 and
the cost of goods sold for the month ended 31 December 2021 using:
i. the FIFO cost method
ii. the moving average cost method.

(b) Explain whether the physical inventory should be equal to the amount indicated by the
inventory record under the perpetual inventory system.
QUESTION 3

Palma Putih Bhd began operations in 2020 by selling a single product. Data on purchases for
the year are as follows:

Purchases
Date Units Purchased Unit Cost (RM) Total Cost (RM)
18 April 2,300 13.00 29,900
9 May 2,500 14.00 35,000
13 June 2,600 14.20 36,920
10 July 2,300 15.00 34,500
16 August 1,700 15.25 25,925
14 October 800 15.50 12,400
12 November 500 15.75 7,875
9 December 500 17.00 8,500

On 5 January 2021, the president of the company, Mr. Haikal, reported 5,000 units physical
inventory from stock count that was taken on 31 December 2020. Other financial information
for Palma Putih Bhd for the year ended 31 December 2020 are as follows:

Detail Information RM
Total sales 362,500
Sales discount and allowance 12,000
Salaries and wages expenses 48,000
Distribution costs 22,000
Administrative costs 39,000
Finance costs 3,000
Other expenses 3,500
Taxation 36,000

REQUIRED:

(a) Determine the cost of inventory under the periodic system using First-In, First-Out
(FIFO) method as at 31 December 2020.

(b) Determine the net profit for the year under ended 2020.

(c) Palma Putih Bhd plans to expand its product line. Therefore, the president asked for
your advice on the use of a perpetual inventory system in the future. Discuss TWO (2)
advantages and TWO (2) disadvantages of using a perpetual inventory system.