The physical count of inventory of a retailer was higher than shown by the perpetual records. Which of the following could explain the difference?
A) Credit memos for several items returned by customers had not been recorded.
B) Inventory items had been counted but the tags placed on the items had not been taken off the items and added to the inventory accumulation sheets.
C) An item purchased 'FOB shipping point' had not arrived at the date of the inventory count and had not been reflected in the perpetual records.
D) No journal entry had been made on the retailer's books for several items that the retailer returned to its suppliers.

Question

Quizplus · Accepted Answer

Credit memos for returned items not recorded would mean the perpetual records still show these items as sold, while they are actually in inventory, leading to a higher physical count.

The Physical Count of Inventory of a Retailer Was Higher