The auditors of Tankard plc observed a physical count of inventory for the firm conducted on

31st January 2022. The physical stock count produced an inventory total value of 24,378.

The inventory value in the general ledger at the same date was 22,197. Staff at Tankard plc

investigated the difference and found the following;

A sheet containing data collected at the physical count with a value of 287 had been

omitted from the total.

Goods costing 164 had been stored under a plastic cover and had not been included

in the physical stock count.

Free samples from a supplier had been included in the physical count at their normal

retail value of 589.

Tankard plc had received goods costing 1,732 on 31st January 2022 and these had

been counted in the physical stock but had not been recorded on a goods received

note or in the purchase day book.

Goods costing 71 sent to a customer on a sale or return basis had been recorded as

sold on 31st January even though Tankard plc received them back in the post on 1st

February.

Goods stored outside the warehouse had been included in both values at their original

cost of 426. These goods had been damaged in a storm and now can only be sold for

200 after being repaired at a cost of 12.

One item of inventory had been included in the physical inventory at its selling price

of 512 rather than its purchase cost of 201.

REQUIRED:

a. Calculate the correct value for the closing inventory and reconcile this to the value of

the physical stock count at 31st January 2022.

[14 marks]

b. Suggest what you would do with any remaining difference between the physical and

the accounting inventory that could not be reconciled following a further

investigation.

[4 marks]

c. Identify six tests that the auditors may undertake as part of their observation of the

physical inventory count.

The auditors of Tankard plc observed a physical count of inventory for the firm conducted on

31st January 2022. The physical stock count produced an inventory total value of 24,378.

The inventory value in the general ledger at the same date was 22,197. Staff at Tankard plc

investigated the difference and found the following;

A sheet containing data collected at the physical count with a value of 287 had been

omitted from the total.

Goods costing 164 had been stored under a plastic cover and had not been included

in the physical stock count.

Free samples from a supplier had been included in the physical count at their normal

retail value of 589.

Tankard plc had received goods costing 1,732 on 31st January 2022 and these had

been counted in the physical stock but had not been recorded on a goods received

note or in the purchase day book.

Goods costing 71 sent to a customer on a sale or return basis had been recorded as

sold on 31st January even though Tankard plc received them back in the post on 1st

February.

Goods stored outside the warehouse had been included in both values at their original

cost of 426. These goods had been damaged in a storm and now can only be sold for

200 after being repaired at a cost of 12.

One item of inventory had been included in the physical inventory at its selling price

of 512 rather than its purchase cost of 201.

REQUIRED:

a. Calculate the correct value for the closing inventory and reconcile this to the value of

the physical stock count at 31st January 2022.

[14 marks]

b. Suggest what you would do with any remaining difference between the physical and

the accounting inventory that could not be reconciled following a further

investigation.

[4 marks]

c. Identify six tests that the auditors may undertake as part of their observation of the

physical inventory count.