Ogura Ltd are reta ilers of oriental tea. Stock records for one of their brands revealed the following information for 1983:

Stock 1.1.83 £52 500 Stock 31.12.83 £79200 Historic cost of goods sold £340000 Sales and purchases ofthis particular brand of tea are relatively stable throughout the year. The opening stock was acquired when the cost of this brand of tea was

£17.50 per 100 kilo. Closing stock was acquired when the cost oftea was £19.80 per 100 kilo. The average cost of 100 kilos of this particular brand oftea, during 1983, was £19.00.

(a) Calculate in accordance with the requirements of SSAP 16:

(i) the cost of sales adju stment for 1983;

(ii) the Balance Sheet stock value at 31 December 1983, together with the comparative figure at 31 December 1982.

(b) Explain the significance of the transfer to the current cost reserve of the credit entry relating to the cost of sales adjustment.