Accounting 0452 · IGCSE · Valuation of inventory

Valuation of inventory — practice question

Once Lucy had completed the draft financial statements at the end of her first year of trading, she found two mistakes. 1. Damaged inventory had been recorded at cost price of $340$. It was expected to be sold for $180$. 2. $100$ items that were expected to be sold for $12$ each had been valued at cost price of $7$ each. Carriage inwards of $1$ for each item had not been included in the cost. What impact did these errors have on the gross profit?

  • Aoverstated $60$
  • Boverstated $240$
  • Cunderstated $60$
  • Dunderstated $240$

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