Whippy sound Systems (GST registered) specializes in stereo systems. The inventory records for stereo systems for the month of October 20X4 are provided below:Oct 1 Beginning inventory 10 units @$350 (GST exclusive) each8 Sales 5 units sold at $999 (GST exclusive) each11 Purchases 5 units @ $355 (GST exclusive) each16 Purchases 6 units @ $370 (GST exclusive) each21 Sales 10 units @ $1,010 (GST exclusive) each26 Purchases 8 units @ $375 (GST exclusive) each29 Sales 7 units @ $1,150 (GST exclusive) each

Required:

a) The accountant of Whippy Sound Systems conducted a physical inventory count on 31 October and found only five stereos on hand. Discuss the implications of the perpetual ending inventory figure being different from the actual physical inventory count.

b) Explain the importance of the Lower of cost or market rule with regards to the valuation of ending inventory.

c) The following information has become available to Whippy. Stereo Systems (5 items @ $400 (GST exclusive) each) were in transit on 31 October 20X4 from a supplier with terms FOB destination. These goods had not arrived and were excluded from the 31 October physical inventory count. On 29 October 20X4, a stereo system was in transit to a credit customer with terms FOB shipping point at a cost of $1,296 (GST inclusive). This $1,296 stereo was excluded from the 31 October physical inventory count because the goods had been shipped although it will not reach the customer until 8 November 20X4.How should the information have been accounted for by Whippy on 31 October 20X4?