4. An examination of the company's December 31, 2020, inventory revealed errors in its inventory taking procedures that have caused inventories for the last three (3) years to be incorrect, as follows: December 31, 2018 undertated 160,000.00 December 31, 2019 understated 210,000.00 December 31, 2020 overstated 67,000.00

Q: How do inventory errors affect the financial statements.

A: The financial statements of the business includes the income statement and balance sheet.

Q: Portsmouth Company makes upholstered furniture. Its only variable cost is direct materials. The…

A: It is necessary to do an analysis of the contribution margin per hour for the couches in order to…

Q: How do you enter an adjusting entry for Inventory?

A: Inventory adjustment Fluctuation in the inventory is a serious issue for a business entity. The…

Q: The entry to record inventory shrinkage under a perpetual inventory system would include a debit to:…

A: Explanation: When There is Inventory shrinkage Under the perpetual inventory system The following…

Q: How do you find the ending inventory?

A: Many companies earn revenue by selling inventory rather than a service. These companies are…

Q: How do we record and report inventory shrinkage? Which accounts are affected?

A: Inventory Shrinkage:-When inventory has become less than the actual inventory recorded is known as…

Q: Indicate the effects of inventory errors on the financial statements

A: Solution- 1-A merchandising company must be sure that it has properly valued its ending inventory.…

Q: What is inventory shrinkage? Describe the adjusting entry that would be recorded to account for…

A: Inventory shrinkage: When there is a difference between inventory as per books and actual inventory…

Q: Describe Change in Inventory Method and Inventory Errors.

A: Change in Inventory method:   Inventory change is the difference between the amount of last period's…

Q: When computing ending inventory, what is the difference between a LIFO computation and a FIFO…

A: In a LIFO computation, the most recent inventory purchases are assumed to be sold first, and the…

Q: What is meant by the term gross margin? Describe costing inventory using first-in, first-out.…

A: What is meant by the term gross margin?

Q: Explain the appropriate accounting treatment required when a change in inventory method is made.

A: Definition:   Change in inventory method: Change in inventory method is said to be the difference…

Q: How is Inventory audited?

A: Introduction Inventory audit is an analytical procedure that cross checks the financial records with…

Q: Why is it important to periodically take a physical inventory when using a perpetual inventory…

A:

Q: Are there different methods used to account for perpetual inventory?

A: Perpetual inventory is a continous estimation of the inventory balances based on our books of…

Q: When recording a purchase of inventory on credit, which of the following correctly identifies the…

A: The objective of this question is to identify the correct debit and credit entries when recording a…

Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.