The following is a record of inventory movements and recorded sales of Whygate Ltd, a company buying and selling products on credit with a December 2020 year end.

Consider these figures and then attempt the following questions.

(a) Assuming that inventory was determined by count at 31 December 2020 state the adjustment required to sales and trade receivables and indicate the effect on profits of the adjustment.

(b) Assuming that inventory was determined on the basis of recorded inventory movements, state the adjustment required to sales and trade receivables and indicate the effect on profits of the adjustment. The company carries out periodic inventory counts.
You may assume in both cases that purchases have been recorded in the correct period.

(c) What action would you take as auditor to prove that sales/inventory cut-off was accurate?

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Value Despatch note number Inventory Sales despatched record 25 000 1456 12 550 1457 9 000 1458 24 December 30 December 2020 2020 24 December 4 January 2020 2021 30 December 24 Decembe 2020 2020 7 500 1459 30 December 31 December 2020 2020 6.000 1460 31 December 6 January 2020 2021 5 600 1461 4 January 31 Decembe 2021 2020 9 750 1462 4 January 4 January 2021 2021 6 240 1463 6 January 3 January 2021 2021 5 995 1464 31 December 3 January 2020 2021