Reference no: EM133000504
Question - The entity trading as 'Fashion Accessories Pty Ltd', a retailer selling ladies' designer shoes and handbags has not completed a qualitative and quantitative review of inventory for the financial year ending 30 June 2021.
The accountant suggests that all inventory should be counted and a review of the selling prices of older inventory should be completed.
The accountant has now been presented with the following inventory information BEFORE any adjustments have been recorded.
The value of inventory before adjustments is $87,000.
Inventory gain (20 units $140 per unit) before adjustment
Inventory write-down amounted to $1,100 before adjustment.
The net profit before any adjustment is $49,000.
Tax has been disregarded for this question.
1. Describe the impact on (a) Retained Earnings and (b) Inventory after the adjustments for inventory gain and inventory write-down have been recorded. Your response should include calculated figures to support your claim.
2. What would be the impact on the financial reports on 30 June 2021 if the adjustments were not recorded?
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