SPU

Financial Accounting 2A / Accounting 2A – 2024

Class practice question # 2 - Inventory

QUESTION 2

The following inventory transactions were entered into by Alfa Ltd for February 2017:

February

1 Opening inventory: 92 units - 60 units at R120 each

- 32 units at R128 each

6 Sold 64 units

8 Sold 20 units

15 Purchased 200 units at R132 each

20 Sold 140 units

28 Purchased 240 units at R124 each

All units are sold at a selling price of R220 per unit. Alfa Ltd uses the perpetual method of
keeping inventory. On 28 February 2017, it was determined that the normal selling price
of the units dropped to R144 per unit and that the normal selling expenses amounted to
R20 per unit.

REQUIRED:

a. Determine the cost of inventory expense and cost of inventory on hand on 28

February according to the FIFO method.
b. Disclose the above information in the income statement for the month of February
2017.