Inventory Valuation

The accounts of W Thrush are prepared on a monthly basis. Owing to staff holidays the usual month
end inventory taking for July 2004 did not take place. The following information was subsequently
obtained:

(1) The records at 30 June 2004 showed inventory in trade at that date of £56,800.
(2) Inventory is always valued at cost price.
(3) The inventory sheets at 30 June 2004 had been over-added by £850.
(4) Sales during July 2004 amounted to £42,600. All sales include a mark-up of 25%.
(5) Goods purchased by W Thrush during July 2004 cost £29,800.
(6) Returns made by customers during July 2004 amounted to £725 at selling price.
(7) Returns of goods to suppliers during July 2004 amounted to £1,350 at cost price.
(8) It was decided that a quantity of inventory, valued at full cost at 30 June 2004, and which would
normally sell for £2,400, could now only be sold at half cost price.
(9) Included in the July 2004 sales figure were goods on sale or return with a sales value of £650.
The customer has still not indicated her intention with regard to the goods.

REQUIRED
(a) Prepare a calculation showing W Thrush's inventory valuation at 31 July 2004. Your answer
should commence with the value of inventory at 30 June 2004 of £56,800 and finish with your
inventory valuation at 31 July 2004. Marks will be awarded for presentation.
(b) Prepare, in vertical format, the Trading account of W Thrush for the month ended 31 July 2004.

Answer Guide: (a) £50,460 (b) Gross Profit £7,285