“The item you were attempting to purchase could not be found” Android in-app billing

Had the same problem. I contacted as well and got this response from Google

Thank you for contacting Google Play Developer Support and reporting the behavior you're seeing with in-app billing.

We recently made some changes to our systems and we are now requiring an app to be published before testing. We are currently recommending to publish your APK to the Alpha channel in order to test licensing, in-app billing, and expansion files. There is no need to create a special testing group in the Alpha channel to test these features, however the app must be published and not in draft mode.

We apologize for the inconvenience and are working to update our documentation to reflect these changes.

After publishing my APK to Alpha (as I haven't launched yet) and waiting an hour or so, my IAP test purchases started working again.

I was experiencing this issue and just chatted with Google's support via https://support.google.com/googleplay/android-developer/?hl=en#contact=1

and they said that I needed to publish the app. That meant adding screenshots, a description etc and then publishing (Clicking on the publish button in the upper right corner of the developer console). If your app is in the draft state, that could be the issue.

edit: This is now spelled out in the developer docs here:

http://developer.android.com/google/play/billing/billing_testing.html#draft_apps

Draft Apps are No Longer Supported

Previously, you could publish a "draft" version of your app for testing. This functionality is no longer supported. Instead, there are two ways you can test how a pre-release app functions on the Google Play store:

You can publish an app to the alpha or beta distribution channels. This makes the app available on the Google Play store, but only to the testers you put on a "whitelist". In a few cases, you can test Google Play functionality with an unpublished app. For example, you can test an unpublished app's in-app billing support by using static responses, special reserved product IDs that always return a specific result (like "purchased" or "refunded").

Had spend hours trying to test IAB, though few days ago it worked.

Here is the change ....

"Draft Apps are No Longer SupportedPreviously, you could publish a "draft" version of your app for testing. This functionality is no longer supported. Instead, there are two ways you can test how a pre-release app functions on the Google Play store:

You can publish an app to the alpha or beta distribution channels. This makes the app available on the Google Play store, but only to the testers you put on a "whitelist"."

@http://developer.android.com/google/play/billing/billing_testing.html#draft_apps

Hope these crucial changes are emailed to developers saving hours..