Henry, dealing in hover lawnmowers, provides you with an extract from his accounts as stated on the right. You are informed that:

(i) Henry buys each unit at £240 and sells at £300.

(ii) He has five units in hand at the year-end.

(iii) Three units still with customers are within their returnable period, but have been accounted for as sold.

Required:

(a) Explain the adjustment that would need to be made to the balances to record the reversal of the entries made for the goods that remain out on approval.

(b) Prepare the Statement of income for the accounting period.

Transcribed Image Text:

Opening inventory Purchases Sales Receivables Expenses £960 £6,720 £8,100 £2,700 £590