Reference no: EM133084776

Question - The following summarised transactions, for the financial year ending June 302021, relate to the business of Emma Clarke, a sole trader, who sells men's and women's clothing. Emma uses a periodic inventory system in the business. Transactions are GST inclusive.

Purchased clothing with a list price of $330,000 on credit. As this was a bulk purchase the supplier gave a trade discount of 15% off the list price. Emma paid cash of $4,400 for transportation inwards costs.

Made cash sales of $220,000 and credit sales of $143,000. Cost of goods sold was $137,000.

Some of the clothing purchased during the year was damaged upon delivery. The clothing was returned to the supplier who agreed to cancel $3,300 of the original purchase.

Paid $44,000 for selling and administrative expenses.

Paid cash totalling $270,000 to suppliers having received discounts totalling $11,000 for prompt payments.

Unhappy credit customers returned clothing with a selling price of $3,300 and these were returned to stock. The cost of goods returned was $1,500.

Received cash totalling $110,000 from trade debtors having given discounts of $5,500 for prompt payments.

After trading finished on 30 June 2021, a stocktake showed that the cost of unsold clothing on hand was $165,000.

The Inventory Ledger Account, prior to the transactions listed above, had a balance at 1 July 2020 of $55,000.

Required -

1. Prepare the general journal entries to record the above transactions. You are not required to complete narrations or posting reference.

2. Complete the Statement of Financial Performance for the year ending June 30 2021. Use the Excel template provided.

3. Emma is not convinced the periodic inventory system is the best one to use. She is considering switching to a perpetual inventory system. She would like to know the advantages of the perpetual inventory system so she can make an informed decision. What are the advantages of the perpetual inventory system?