QUESTION 2 Oluwafemi Superstore Plc (OSP) is a large retail chain with outlets across Lagos, Abuja, and Port Harcourt. The company adopts the periodic inventory system. The following transactions relate to one of its product lines – Premium Rice (50kg bags) – for the month of October 2023: Date | Transaction | Units | Unit Cost (N) | Unit Selling Price (N) 01 Oct 2023 | Opening inventory | 500 | 12,000 | – 05 Oct 2023 | Purchase | 1,200 | 13,500 | – 12 Oct 2023 | Sales | 900 | – | 18,000 18 Oct 2023 | Purchase | 800 | 14,200 | – 25 Oct 2023 | Sales | 1,100 | – | 18,500 31 Oct 2023 | Closing inventory | ? | – | – Additional information: (i) At 31 October 2023, the net realisable value of Premium Rice was N13,000 per bag. (ii) OSP's management is considering whether to use FIFO or Weighted Average Cost (AVCO) as its inventory cost formula. (iii) The company's accounting policy requires inventory to be measured at the lower of cost and NRV. (iv) Storage and handling costs of N150,000 were incurred during October 2023, which management has included in the cost of closing inventory. Required: (a) Calculate the value of closing inventory as at 31 October 2023 using: (i) The FIFO method; and (ii) The Weighted Average Cost (AVCO) method. In each case, state the value to be recognised in the financial statements after applying the lower of cost and NRV rule. (12 marks) (b) Advise OSP's management on whether the storage and handling costs of N150,000 should be included in the cost of closing inventory, with reference to IAS 2. (4 marks) (c) State FOUR cost formulas/methods permitted and NOT permitted under IAS 2, and explain why IAS 2 prohibits the use of the LIFO method. (4 marks) (Total: 20 marks)