ACCA Applied Knowledge · Financial Accounting · Inventories
Opening inventory was $52,000, purchases $410,000, carriage inwards $6,000, returns outwards $9,000 and closing inventory $47,000 at cost. After the figures were drawn up, it was found that goods costing $4,000 held on a sale or return basis by a customer were excluded from closing inventory, though sales of $5,500 for them had been recorded. What is the correct cost of sales after correcting this?
Cost of sales is $408,000. Goods on sale or return are still the seller's inventory, so closing inventory rises to $51,000. Opening inventory plus purchases and carriage inwards, less returns outwards and corrected closing inventory, gives 52,000 + 410,000 + 6,000 - 9,000 - 51,000.
- A$408,000Correct
- B$412,000
- C$416,000
- D$417,000
Explanation
Goods on sale or return remain the seller's inventory until accepted, so add $4,000 to closing inventory, making it $51,000, and reverse the sale. Cost of sales = 52,000 + 410,000 + 6,000 - 9,000 - 51,000 = 408,000. The $412,000 option uses the uncorrected closing inventory of $47,000 less nothing: 52+410+6-9-47 = 412.
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