Mathematics · Financial Accounting
A business with a 31 December year-end performed its physical inventory count on 5 January 20X5. The value at the count was $45,000. Between 1 January and 5 January, the following occurred: - Goods were purchased for $5,000 (delivered 3 January). - Sales of $8,000 were made at a standard mark-up of 25% on cost. - The business discovered that the opening inventory (1 January 20X4) had been overstated by $2,000. What is the correct Closing Inventory figure to be used in the 20X4 Statement of Profit or Loss, and what is the net effect of these errors/adjustments on the 20X4 Net Profit?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Closing Inventory: $46,400; Net Profit: $600 increase
- 2Closing Inventory: $46,400; Net Profit: $3,400 decrease
- 3Closing Inventory: $43,600; Net Profit: $600 increase
- 4Closing Inventory: $43,600; Net Profit: $3,400 decrease✓
Correct answer
Closing Inventory: $43,600; Net Profit: $3,400 decrease
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