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Due to theft or error— the business should have on hand inventory costing $184,000. But on December 31, 2019 Steve Austin, the owner of Austin Sound, counts the merchandise in the store, and the total cost of the goods on hand comes to only $ 178,000(actual amount). The entry would include a on December 31, 2019:
- A) credit to Inventory 6,000
- B) debit to Accounts Payable 6,000
- C) debit to Sales Revenue 6,000
- D) credit to Cost of Goods Sold 6,000
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- On January 5, 2019, ShoeKing Corp. sells for cash 500 pairs of volleyball shoes to FootAction, a shoe retailer, for 70 each. FootAction has the right to return the shoes for any reason up to March 31, 2019, for a full refund. The cost of each pair of shoes is 32. ShoeKing predicts that it is probable that 40 pairs of the shoes will be returned. ShoeKing uses the perpetual method for inventory. Required: 1. Prepare ShoeKings journal entry on January 5, 2019, to account for this transaction. 2. Assume that FootAction returns 35 pairs of shoes on March 31, 2019. Prepare the journal entry to record this return.Your client, Daves Sport Shop, sells sports equipment and clothing in three retail outlets in New York City. During 2019, the CFO decided that keeping track of inventory using a combination of QuickBooks and spreadsheets was not an efficient way to manage the stores inventories. So Daves purchased an inventory management system for 9,000 that allowed the entity to keep track of inventory, as well as automate ordering and purchasing, without replacing QuickBooks for its accounting function. The CFO would like to know whether the cost of the inventory management program can be expensed in the year of purchase. Write a letter to the CFO, Cassandra Martin, that addresses the tax treatment of purchased software. Cassandras mailing address is 867 Broadway, New York, NY 10003.Company Elmira reported the following cost of goods sold but later realized that an error had been made in ending inventory for year 2021. The correct inventory amount for 2021 was 32,000. Once the error is corrected, (a) how much is the restated cost of goods sold for 2021? and (b) how much is the restated cost of goods sold for 2022?
- At the end of 2019, Manny Company recorded its ending inventory at 350,000 based on a physical count. During 2020, the company discovered that the correct inventory value at the end of 2019 should have been 400,000 because it made a counting error. Upon discovery of this error in 2020, what correcting journal entry will Manny make? Ignore income taxes.Palisade Creek Co. is a merchandising business that uses the perpetual inventory system. The account balances for Palisade Creek Co. as of May 1, 2019 (unless otherwise indicated), are as follows: During May, the last month of the fiscal year, the following transactions were completed: Instructions 1. Enter the balances of each of the accounts in the appropriate balance column of a four-column account. Write Balance in the item section and place a check mark () in the Posting Reference column. Journalize the transactions for May, starting on Page 20 of the journal. 2. Post the journal to the general ledger, extending the month-end balances to the appropriate balance columns after all posting is completed. In this problem, you are not required to update or post to the accounts receivable and accounts payable subsidiary ledgers. 3. Prepare an unadjusted trial balance. 4. At the end of May, the following adjustment data were assembled. Analyze and use these data to complete (5) and (6). 5. (Optional) Enter the unadjusted trial balance on a 10-column end-of-period spreadsheet (work sheet), and complete the spreadsheet. 6. Journalize and post the adjusting entries. Record the adjusting entries on Page 22 of the journal. 7. Prepare an adjusted trial balance. 8. Prepare an income statement, a statement of owners equity, and a balance sheet. 9. Prepare and post the closing entries. Record the closing entries on Page 23 of the journal. Indicate closed accounts by inserting a line in both Balance columns opposite the closing entry. Insert the new balance in the owners capital account. 10. Prepare a post-closing trial balance.Business with gross receipts of $25 million or less may treat inventory as nonincidental materials and supplies. Find Regulation Section 1.162-3 and read paragraphs (a)(1) and (a)(2) to help answer the following: Frank owns an auto repair shop that serves a particular model of auto and so he tends to purchase parts in bulk. Frank is eligible to treat inventory as non-incidental materials and elects to do so. In December of 2019 he purchases 24 oil filters. He uses one to repair an auto in January 2020, and then about 2 per month and ends 2020 with 14 filters. Explain how Frank will treat his oil filter inventory.
- On April 5, a customer returns 20 bicycles with a sales price of $250 per bike to Barrio Bikes. Each bike cost Barrio Bikes $100. The customer had yet to pay on their account. The bikes are in sellable condition. Prepare the journal entry or entries to recognize this return if the company uses A. the perpetual inventory system B. the periodic inventory systemOn June 30, 2019, the balances of the accounts appearing in the ledger of Simkins Company are as follows: Instructions 1. Does Simkins Company use a periodic or perpetual inventory system? Explain. 2. Prepare a multiple-step income statement for Simkins Company for the year ended June 30, 2019. The merchandise inventory as of June 30, 2019, was 508,000. The adjustment for estimated returns inventory for sales for the year ending December 31, 2019, was 33,000. 3. Prepare the closing entries for Simkins Company as of June 30, 2019. 4. What would the net income have been if the perpetual inventory system had been used?The balance in Ashwood Companys accounts payable account at December 31, 2019, was 1,200,000 before any necessary year-end adjustment relating to the following: Goods were in transit from a vendor to Ashwood on December 31, 2019. The invoice cost was 85,000, and the goods were shipped FOB shipping point on December 29, 2019. The goods were received on January 2, 2020. Goods shipped FOB shipping point on December 20, 2019, from a vendor to Ashwood were lost in transit. The invoice cost was 40,000. On January 5, 2020, Ashwood filed a 40,000 claim against the common carrier. Goods shipped FOB destination on December 22, 2019, from a vendor to Ashwood were received on January 6, 2020. The invoice cost was 20,000, What amount should Ashwood report as accounts payable on its December 31,2019, balance sheet? a. 1,260,000 b. 1,285,000 c. 1,325,000 d. 1,345,000
- Refer to the information in E22-13. Required: Prepare the correcting journal entries if the company discovers each error 2 years after it is made and it has closed the books for the second year. Ignore income taxes. E22-13: The following are independent errors made by a company that uses the periodic inventory system: a. Goods in transit, purchased on credit and shipped FOB destination, 10,000, were included in purchases but not in the physical count of ending inventory. b. Purchase of a machine for 2,000 was expensed. The machine has a 4-vear life, no residual value, and straight-line depreciation is used. c. Wages payable of 2,000 were not accrued. d. Payment of next years rent, 4,000, was recorded as rent expense. e. Allowance for doubtful accounts of 5,000 was not recorded. The company normally uses the aging method. f. Equipment with a book value of 70,000 and a fair value of 100,000 was sold at the beginning of the year. A 2-year, non-interest-bearing note for 129,960 was received and recorded at its face value, and a gain of 59,960 was recognized. No interest revenue was recorded and 14% is a fair rate of interest.Goods in Transit Gravais Company made two purchases on December 29, 2019. One purchase for 3,000 was shipped FOB destination, and the second for 4,000 was shipped FOB shipping point. Neither purchase had been received nor paid for on December 31, 2019. Required: Which of these purchases, if either, does Gravais include in inventory on December 31, 2019? What is the cost?On December 31, the end of the year, the accountant for Fireside Magazine was called away suddenly because of an emergency. However, before leaving, the accountant jotted down a few notes pertaining to the adjustments. Journalize the necessary adjusting entries. Assume that Fireside Magazine uses the periodic inventory system. ab. A physical count of inventory revealed a balance of 199,830. The Merchandise Inventory account shows a balance of 202,839. c. Subscriptions received in advance amounting to 156,200 were recorded as Unearned Subscriptions. At year-end, 103,120 has been earned. d. Depreciation of equipment for the year is 12,300. e. The amount of expired insurance for the year is 1,612. f. The balance of Prepaid Rent is 2,400, representing four months rent. Three months rent has expired. g. Three days salaries will be unpaid at the end of the year; total weekly (five days) salaries are 4,000. h. As of December 31, the balance of the supplies account is 1,800. A physical inventory of the supplies was taken, with an amount of 920 determined to be on hand.
