You are the senior accountant for a shoe wholesaler that uses the periodic inventory method. You have determined the following information from your company’s records, which you assume is correct: Inventory of $246,720 was on hand at the start of the year. Purchases for the year totalled $1,690,000. Of this, $1,412,000 was purchased on account; that is, accounts payable was credited for this amount at the time of the purchase. A year-end inventory count revealed inventory of $324,800 Required: Assume that the company uses periodic inventory system, calculate cost of sales. Assume now that your company uses the perpetual method of inventory control, and that your records show that $1,548,325 of inventory (at cost) was sold during the year. What is the adjustment needed to correct the records, given the inventory count in item 3 above? What might the need for this adjustment indicate about company operations?
You are the senior accountant for a shoe wholesaler that uses the periodic inventory method. You have determined the following information from your company’s records, which you assume is correct: Inventory of $246,720 was on hand at the start of the year. Purchases for the year totalled $1,690,000. Of this, $1,412,000 was purchased on account; that is, accounts payable was credited for this amount at the time of the purchase. A year-end inventory count revealed inventory of $324,800 Required: Assume that the company uses periodic inventory system, calculate cost of sales. Assume now that your company uses the perpetual method of inventory control, and that your records show that $1,548,325 of inventory (at cost) was sold during the year. What is the adjustment needed to correct the records, given the inventory count in item 3 above? What might the need for this adjustment indicate about company operations?
Chapter18: Accounting Periods And Methods
Section: Chapter Questions
Problem 67P
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You are the senior accountant for a shoe wholesaler that uses the periodic inventory method. You have determined the following information from your company’s records, which you assume is correct:
- Inventory of $246,720 was on hand at the start of the year.
- Purchases for the year totalled $1,690,000. Of this, $1,412,000 was purchased on account; that is, accounts payable was credited for this amount at the time of the purchase.
- A year-end inventory count revealed inventory of $324,800
Required:
- Assume that the company uses periodic inventory system, calculate cost of sales.
- Assume now that your company uses the perpetual method of inventory control, and that your records show that $1,548,325 of inventory (at cost) was sold during the year. What is the adjustment needed to correct the records, given the inventory count in item 3 above?
- What might the need for this adjustment indicate about company operations?
- Assume that during the year, total inventory was sold for $2,800,000 on credit. What would be the entries to record the sales transaction under periodic inventory
control system ? What would be the entries to record the sales transaction under perpetual inventory control system?
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