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Determine the correct pre-tax income of gpl

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Reference no: EM133119413

Question - Geranium Pte Ltd (GPL) reported a draft pre-tax income of $30,000 for the financial year (FY) ended 30 June 2021. Before the finalisation of its FY 2021 accounts, it discovered the following errors in its physical inventory count.

(1) Goods costing $4,500 sold on terms FOB shipping point towards the end of June 2020 were included in the ending inventory for FY 2020 and carried forward to FY 2021.

(2) Goods costing $3,300 were counted twice in the ending inventory for FY 2021.

In September 2021, one of GPL's inventory warehouses was completely destroyed by fire. The current inventory system cannot provide records of the inventory lost in the fire. In order to file an insurance claim for the loss of inventory, GPL managed to obtain the following financial information before the fire occurred.

Amount (S$)

Beginning inventory 7,500

Net purchase 145,000

Sales Revenue 125,000

Gross profit margin 35%

Required -

(i) Determine the correct pre-tax income of GPL for FY 2021.

(ii) Advise GPL on the estimated amount of inventory lost by fire.

Reference no: EM133119413

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