2. In the warehouse at December 31, 2019, were tires that had been sold and paid for by the customer but that were not shipped until 2020. They were all sold on sales invoicelshipping order #1278. The tires were included in the physical inventory. 3. On the evening of December 31, 2019, two cars were on the Arenn Company railroad track. Both cars contained tires that were included in the 1231/2019 physical inventory. Car #SA877560 was unkloaded on January 2, 2020, and received on RR #2064 (cost of tires, P16,800). The freight was paid by the vendor. Car #EE455621 was loaded and sealed on December 31, 2019, and because the freight was paid by the customer, title passed when the car was switched off the Hedley track on January 2, 2020. The sales price was P56,800. This order was sold on sales invoicelshipping order #1281. 4. Temporarily stranded on a railroad track at December 31, 2019, were two cars of tires in transit to Gio Tires company. They were sold on sales invoice/shipping order #1279 and the terms were FOB shipping point. 5. Enroute to Arenn Tire on December 31, 2019 was a truckload of tires that was received on RR #2065. The tires were shipped FOB shipping point and freight of P1,600 was paid by Arenn. However, the freight was deducted from the purchase price of P32,100. 6. Included in the physical inventory were tires damaged by excessive heat in transit and deemed unsalable. Their invoice cost was P16,300; freight charges of P960 had been paid on the tires. Arenn filed a claim against the shipper in January 2020. Required: Calculate the corrected physical inventory at 12312019.
2. In the warehouse at December 31, 2019, were tires that had been sold and paid for by the customer but that were not shipped until 2020. They were all sold on sales invoicelshipping order #1278. The tires were included in the physical inventory. 3. On the evening of December 31, 2019, two cars were on the Arenn Company railroad track. Both cars contained tires that were included in the 1231/2019 physical inventory. Car #SA877560 was unkloaded on January 2, 2020, and received on RR #2064 (cost of tires, P16,800). The freight was paid by the vendor. Car #EE455621 was loaded and sealed on December 31, 2019, and because the freight was paid by the customer, title passed when the car was switched off the Hedley track on January 2, 2020. The sales price was P56,800. This order was sold on sales invoicelshipping order #1281. 4. Temporarily stranded on a railroad track at December 31, 2019, were two cars of tires in transit to Gio Tires company. They were sold on sales invoice/shipping order #1279 and the terms were FOB shipping point. 5. Enroute to Arenn Tire on December 31, 2019 was a truckload of tires that was received on RR #2065. The tires were shipped FOB shipping point and freight of P1,600 was paid by Arenn. However, the freight was deducted from the purchase price of P32,100. 6. Included in the physical inventory were tires damaged by excessive heat in transit and deemed unsalable. Their invoice cost was P16,300; freight charges of P960 had been paid on the tires. Arenn filed a claim against the shipper in January 2020. Required: Calculate the corrected physical inventory at 12312019.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Please see attached pictures
Transcribed Image Text:2. In the warehouse at December 31, 2019, were tires that had been sold and paid for by the
customer but that were not shipped until 2020. They were all sold on sales invoice/shipping order
#1278. The tires were included in the physical inventory.
3. On the evening of December 31, 2019, two cars were on the Arenn Company railroad track. Both
cars contained tires that were included in the 1231/2019 physical inventory:
Car #SA877560 was unloaded on January 2, 2020, and received on RR #2064 (cost of tires,
P16,800). The freight was paid by the vendor.
Car #EE455621 was loaded and sealed on December 31, 2019, and because the freight was paid
by the customer, title passed when the car was switched off the Hedley track on January 2, 2020.
The sales price was P56,800. This order was sold on sales invoicelshipping order #1281.
4. Temporarily stranded on a railroad track at December 31, 2019, were two cars of tires in transit to
Gio Tires company. They were sold on sales invoice/shipping order #1279 and the terms were
FOB shipping point.
5. Enroute to Arenn Tire on December 31, 2019 was a truckload of tires that was received on RR
#2065. The tires were shipped FOB shipping point and freight of P1,600 was paid by Arenn.
However, the freight was deducted from the purchase price of P32,100.
6. Included in the physical inventory were tires damaged by excessive heat in transit and deemed
unsalable. Their invoice cost was P16,300; freight charges of P960 had been paid on the tires.
Arenn filed a claim against the shipper in January 2020.
Required: Calculate the corrected physical inventory at 1231/2019.
Transcribed Image Text:You have been engaged for the audit of Arenn Tire for the year ended December 31, 2019. Arenn is
engaged in the wholesale of auto parts business. All sales are made at cost plus 30% of cost. Arenn
maintains perpetual inventory records and adjust the records annually after taking a physical inventory
count.
Shown below are portions of Arenn's sales and inventory accounts for tires, the single most important (40%
of sales) product handled by the company.
Tire Sales and Inventory Accounts
Tire sales
Date
Reference
12/31 Closing entry
Amount
Date
Reference
Amount
P11,460,200
12/27 SO# 1278
12/28 SO# 1279
12/28 SO# 1280
1231 SO# 1281
12/31 SO# 1282
1231 SO# 1283
12/31 SO# 1284
Balance forwarded P11,250,000
16,400
48,600
20,100
56,800
17,600
42,700
8,000
P11.460 200
P11.460,200
Tire Inventory
Amount
P780,680 12/31 Adjustment to
6,400
22,600
10,800
Date
Reference
Balance forwarded
Date
Reference
Amount
P120,480
12/28 RR# 2060
12/30 RR# 2062
1231 RR# 2063
physical
You observed the physical inventory and are satisfied that it was taken properly. The tire inventory is
located in two adjacent bays in the company's central warehouse.
When performing sales and purchases cutoff test, you found that at December 31, 2019, the last receiving
report used was #2063. Moreover, you determined that no shipments had been made on any shipping
orders with numbers larger than 1281.
You also obtained the following information:
1. Included in the physical inventory at December 31, 2019, were tires that had been purchased and
received on RR #2061 but for which an invoice was not received until 2020. The cost was
P14,200.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 3 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education