Reference no: EM132321763

Question 1: Inventories

Inventories and purchases for the month of June for Telelink Ltd are as follows:

	Units	Per Unit	Total
Inventory, 1 June	1,000	$10	$10,000
Purchase, 3 June	10,000	11	110,000
Purchase, 15 June	5,000	12	60.000
Purchase, 20 June	4,000	15	60,000
Inventory, 30 June	6,000	-	-

Telelink Ltd uses the periodic inventory system. Units sell at $20 each.

Required: For the purpose of this question, please ignore GST. Show all your workings.

(i) Compute the gross profit for June assuming Telelink Ltd uses the FIFO method of costing stock.

(ii) Compute the gross profit for June assuming Telelink Ltd uses the weighted average method of costing stock.

Question 2

On 18 July, the warehouse storing the inventory of PRAN Ltd was destroyed by a fire. The insurance company asked the managing director to prove his inventory loss. Available records indicated the following:

Sales up to 18 July	$1,082,000
Sales returns up to 18 July	60,000
Beginning inventory	320,000
Purchase	926,800
Purchases returns	22,000
Gross profit margin	35%

Required: For the purpose of this question, please ignore GST. Show all your workings. Determine the amount PRAN Ltd can claim for the inventory loss.