Reference no: EM132795553
De Luna Bhd is a company located in Jitra, Kedah. The transactions for De Luna Bhd for the year 2019 in relation to product X are as follow:
Date and Transactions :
- 20 January : Purchased 3,000 units of product X with a price of RM2,400,000.
- 19 February : Sold 2,800 units of product X on account free on BOD shipping point to VB Enterprise with the price of RM1,500 per unit.
- 25 March : Purchased 2,000 units of product X with a cost of RM950 per unit.
- 20 April : Sold 2,000 units of product X to Kakala Sdn Bhd and the transaction was made in cash with the price of RM1,600 per unit.
- 28 April : Due to wrong specification, 80 units of product sold on 20 April 2019 were returned to customer.
- 25 August : Purchased another 1,500 units of product X with overall cost of RM1,425,000
- 1 September : 100 units of product X that were bought in 25 August 2019 were returned to supplier due to wrong specification.
- 20 November : Purchased 2,000 units of product X with a total purchase cost of RM2,000,000.
- 17 December : Sold for credit 3,500 units of product X to ReadyGo Enterprise with a selling price of RM1,250 per unit.
Additional information:
1. As at 31 December 2018, the company's inventory showed an ending balance of 2,000 units at the cost of RM1,000 per unit.
2. Other expenses for the year 2018 were RM1,500,000,
3. Assuming the tax for the year 2019 is 24%.
REQUIRED:
Problem (a) Calculate the amount of ending inventory as at 31 December 2019 using the method of:
(i) First in first out (FIFO) (ii) Moving average cost method
Problem (b) Prepare the Income Statement for the Year 2019 by referring to both FIFO and moving average cost method effects.
Problem (c) Assuming that you are an accountant of De Luna Bhd. If you have been given a chance to choose between the two method, which one you prefer and why?
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