Fuque Ltd. uses the retail inventory method to estimate ending inventory for its monthly financial statements. The following data pertain to a single department for the month of October 2019.

Inventory, October 1, 2019

At cost.............................................£ 52,000

At retail...............................................78,000

Purchases (exclusive of freight and returns)

At cost..............................................272,000

At retail............................................423,000

Freight-in...........................................16,600

Purchase returns

At cost.....................................................5,600

At retail...................................................8,000

Markups.................................................9,000

Markup cancellations...........................2,000

Markdowns (net) .................................3,600

Normal spoilage and breakage........10,000

Sales...................................................390,000

Instructions

a. Using the conventional retail method, prepare a schedule computing estimated LCNRV inventory for October 31, 2019.

b. A department store using the conventional retail inventory method estimates the cost of its ending inventory as £60,000. An accurate physical count reveals only £47,000 of inventory at LCNRV. List the factors that may have caused the difference between the computed inventory and the physical count.