Refer to the information stated in respect of Barlow Garments in PQ (6.4) above. When ascertaining the cost of closing inventory at £592,000, the following errors have been made:

(i) The inventory includes 400 party frocks at their cost of £40 each. These frocks have a defect. It would cost £3 per frock to remedy the defect and thereafter each of them can be sold for only £28.

(ii) The inventory includes 480 casual shirts at £100 each; whereas these shirts cost £100 per dozen. Required: Prepare a revised Statement of income for the year ended 31 December 2010 and the Statement of financial position as at that date, making appropriate corrections of the errors identified.

Data from PQ (6.4) 

The year-end Trial Balance of Barlow Garments is set out. You are informed as follows:

All expenses in the year have been paid in full.

Goods costing £54,000 issued free for sales promotion, and others costing £12,000 taken by Mr Barlow for personal use, have not been accounted for.

On the basis of a physical inventory conducted on 31 December 2010 the cost of unsold goods has been identified as £592,000.

Ignore depreciation.

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Trial Balance as at 31 December £'000 Non-current assets Inventory - 31.12.2009 Purchases Sales Drawings Carriage inwards Salaries and wages Rent Returns inwards Returns outwards Trade receivables Trade payables Other expenses Cash and bank Capital 910 412 3,248 - 148 112 288 150 125 - 495 165 14 - 6,067 2010 £'000 - 4,845 I I I 96 326 I 800 6,067