Question

Part A

Stapular Garment Enterprise (SGE) is a retailer operating in Kulim, Kedah. SGE uses the perpetual inventory method. Assume there are no credit transactions; all amounts are settled in cash. You are provided with the following information for SGE, for the month of January 2020.  

January 1 Opening inventories 160 units @ RM20.00

January 2 Purchase 100 units @ RM22.00

January 6 Sale 180 units @ RM40.00

January 9 Purchase 75 units @ RM24.00

January 10 Sales 50 units @ RM45.00

January 23 Purchase 100 units @ RM25.00

January 30 Sale 130 units @ RM48.00

Required:

Determine the cost of goods sold and the ending inventory using;

1) FIFO (First in, first out)

2) LIFO (Last in, first out)

Part B

The comparative balance sheets for Subutay Company Sdn. Bhd. appear below:

Subutay Company Sdn. Bhd.

Comparative Balance Sheet

2019 2018

Assets

Cash RM38,000 RM13,000

Account receivable 18,000 14,000

Inventory 25,000 15,000

Prepaid insurance 7,000 9,000

Stock investments 0 18,000

Equipment 60,000 30,000

Accumulated depreciation

Equipment (18,000) (14,000)

Total Assets 130,000 85,000

Liabilities and Stockholder's equity

Account payable 25,000 7,000

Bonds payable 37,000 45,000

Common stock 40,000 23,000

Retained earnings 28,000 10,000

Total liabilities and  

stockholder's equity 130,000 85,000

Additional information:

1. Net income for the year ending December 31, 2019, was RM30,000. 2. Cash dividends of RM12,000 were declared and paid during the year. 3. Stock investments that had a book value of RM18,000 were sold for RM13,000. 4. Sales for 2019 are RM130,000.

Required:

Prepare a statement of cash flows for 2019 using the indirect method

Answer 1

FIFO method Inventory register
Date	Particulars	Purchase			Sales			End Balance
		Units	Rate	Amount	Units	Rate	Amount	Units	Rate	Amount
01-Jan	Opening	160	20	3200				160	20	3200
02-Jan	Purchase	100	22	2200				160	20	3200
								100	22	2200
06-Jan	Sales				160	20	3200	80	22	1760
					20	22	440
09-Jan	Purchase	75	24	1800				80	22	1760
								75	24	1800
10-Jan	Sales				50	22	1100	30	22	660
								75	24	1800
23-Jan	Purchase	100	25	2500				30	22	660
								75	24	1800
								100	25	2500
30-Jan	Sale				30	22	660	75	25	1875
					75	24	1800
					25	25	625
	Total	435		9700	360		7825	75	25	1875

Cost of Goods Sold	7825
Inventory	1875

LIFO method
Date	Particulars	Purchase			Sales			End Balance
		Units	Rate	Amount	Units	Rate	Amount	Units	Rate	Amount
01-Jan	Opening	160	20	3200				160	20	3200
02-Jan	Purchase	100	22	2200				160	20	3200
								100	22	2200
06-Jan	Sales				100	22	2200	80	20	1600
					80	20	1600
09-Jan	Purchase	75	24	1800				80	20	1600
								75	24	1800
10-Jan	Sales				50	24	1200	80	20	1600
								25	24	600
23-Jan	Purchase	100	25	2500				80	20	1600
								25	24	600
								100	25	2500
30-Jan	Sale				100	25	2500	75	20	1500
					25	24	600
					5	20	100
	Total	435		9700	360		8200	75	20	1500

Cost of Goods sold	8200
Inventory	1500

PART B

	2019	2018
Cash	38000	13000
Accounts receivable	18000	14000
Inventory	25000	15000
Prepaid Insurance	7000	9000
Stock investments	0	18000
Equipment	60000	30000
Accumulated depreciation- equipment	-18000	-14000
Total Assets	130000	85000
Liabilities and stockholders' equity
Account payable	25000	7000
Bond payable	37000	45000
Common stock	40000	23000
Retained earnings	28000	10000
Total liabilities and stockholders' equity	130000	85000

Cashflow statement indirect method
Cash flow from operating activities
Net income	30000
Add: loss on sale of investments	5000
Add: depreciation	4000
Changes in working capital
Increase in accounts receivable	-4000
Increase in inventory	-10000
Decrease in prepaid insurance	2000
Increase in accouns payable	18000
Net cash flow from operating activities	45000
Cash flow from investing activities
Sale of Stock investments	13000
Equipment purchase	-30000
Net cash flow from investing activities	-17000
Cash flow from financing activities
Decrease in bond payable	-8000
Increase in common stock	17000
Dividends paid	-12000
Net cash flows from financing activities	-3000
Net change in cash flows	25000
Beginning balance	13000
End balance	38000