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Andaman Limited is a retailer of sports apparel situated in Cape Town. During the current year, the financial director of Andaman discovered that an error had occurred: inventory has been incorrectly valued. The correct valuation method is the first in first out method, whereas the weighted average cost method had been used for the past four years. The financlal director turned to you for assistance in rectifying this. Inventory balances based on the weighted average cost method are as follows: - 20.7: R 20000 - 20.6: R 19000 - 20.5: R 17000 20.4: R 15000 Inventory balances based on the first in first out method are as follows: - 20.7: R 23000 - 20.6: R 20000 - 20.5: R 19000 - 20.4R R16000 The following draft financial statements are available to you: Andaman Limited Draft (extract) statement of profit or loss and other comprehensive income For the year ended 31 December 20.7 When drafting the 20.8 financial statements, it was brought to the attention of the management of Harvey (Pty) Ltd that certain items were erroneously included in inventory at 31 December 20.7. These items, with a value of R1125000 had been sold before the 20.7 year end. The following financial information is available: Retained earnings at 1 January 20.7 was R 21875000 . Cost of sales for 20.7 includes the R 1125000 error in opening inventory. An income tax rate of 28% applies for the 20.8 and 20.7 year. Required: Show the impact of the error in the statement of profit or loss and retained earnings for the 0.8 financial statements. Comparatives are required. Andaman Limited is a retailer of sports apparel situated in Cape Town. During the current year, the financial director of Andaman discovered that an error had occurred: inventory has been incorrectly valued. The correct valuation method is the first in first out method, whereas the weighted average cost method had been used for the past four years. The financlal director turned to you for assistance in rectifying this. Inventory balances based on the weighted average cost method are as follows: - 20.7: R 20000 - 20.6: R 19000 - 20.5: R 17000 20.4: R 15000 Inventory balances based on the first in first out method are as follows: - 20.7: R 23000 - 20.6: R 20000 - 20.5: R 19000 - 20.4R R16000 The following draft financial statements are available to you: Andaman Limited Draft (extract) statement of profit or loss and other comprehensive income For the year ended 31 December 20.7 When drafting the 20.8 financial statements, it was brought to the attention of the management of Harvey (Pty) Ltd that certain items were erroneously included in inventory at 31 December 20.7. These items, with a value of R1125000 had been sold before the 20.7 year end. The following financial information is available: Retained earnings at 1 January 20.7 was R 21875000 . Cost of sales for 20.7 includes the R 1125000 error in opening inventory. An income tax rate of 28% applies for the 20.8 and 20.7 year. Required: Show the impact of the error in the statement of profit or loss and retained earnings for the 0.8 financial statements. Comparatives are required

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