Jerry Noel retails computer software, fixing his selling price consistently at cost plus a third. The account balances recording his transactions during the year to 31 December 2010 are stated on the right. His physical count as at the year-end reveals the cost of inventory held as £546,000.

Required:

(a) Explain whether Jerry has any reason to be unhappy with the year-end inventory valuation.

(b) Identify the reasons which may have caused the results of inventory taken at year-end to be different from what the figure should have been as at 31.12.2010.

Transcribed Image Text:

Inventory 1.1.2010 Purchases Sales Return inwards Return outwards £324 £4,620 £5,840 £124 £76