On December 31, 2010, Paperville computed an ending inventory valuation of $250,000. The accounts for 2010 have been adjusted and closed. Subsequently, the independent auditor located several discrepancies in the 2010 ending inventory. These were discussed with the accounting manager, who then prepared the following table. 1. Merchandise in store (at 50% above cost) . . . . . . . . . . . . . . . . . . . . . . . $250,000 2. Merchandise out on consignment at sales price (cost of inventory is $4,000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 3. Goods held on consignment from Davis Electronics at sales price (sales commission, 20% of sales price, included) . . . . . . . . . . . . . . . 4,000 4. Goods purchased, in transit (shipped FOB shipping point, estimated freight, not included, $800), invoice price. . . . . . . . . . . . . . 5,000 5. Goods out on approval, sales price, $2,500, cost, $1,000 . . . . . . . . . . . 2,500 Total inventory as corrected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $271,500 Required The auditor did not agree with the “corrected” inventory amount of $271,500. Compute the correct ending inven- tory amount by modifying the “corrected” balance of $271,500. Naperville Company maintains perpetual inventory records on a FIFO basis for the three main products distributed by the company. Aphysical inventory is taken at each year-end to check the perpetual inventory records. The fol- lowing information relates to one of its products for the month ended June 2020. Date Units Unit Cost June 1 Beginning inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,000 $8.10 Purchases and sales (in order) June 3 Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000 8.15 June 4 Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 June 8 Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,000 8.20 June 9 Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,000 June 15 Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000 8.40 June 18 Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,000 8.25 June 20 Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,000 June 29 Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000 8.10 June 30 Ending inventory (per count) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,500 Required a. Reconstruct the perpetual inventory record for this product. b. Prepare eight journal entries (in chronological order) for the above five purchases and three sales. Assume that the selling price is $22 per unit. Also prepare a journal entry for any inventory shortage. c. Prepare the income statement ending with gross margin. Compute the gross profit as a percentage of sales from this income statement.
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
On December 31, 2010, Paperville computed an ending
been adjusted and closed. Subsequently, the independent auditor located several discrepancies in the 2010 ending
inventory. These were discussed with the
1. Merchandise in store (at 50% above cost) . . . . . . . . . . . . . . . . . . . . . . . $250,000
2. Merchandise out on consignment at sales price
(cost of inventory is $4,000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
3. Goods held on consignment from Davis Electronics at sales price
(sales commission, 20% of sales price, included) . . . . . . . . . . . . . . . 4,000
4. Goods purchased, in transit (shipped FOB shipping point,
estimated freight, not included, $800), invoice price. . . . . . . . . . . . . . 5,000
5. Goods out on approval, sales price, $2,500, cost, $1,000 . . . . . . . . . . . 2,500
Total inventory as corrected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $271,500
Required
The auditor did not agree with the “corrected” inventory amount of $271,500. Compute the correct ending inven-
tory amount by modifying the “corrected” balance of $271,500.
Naperville Company maintains perpetual inventory records on a FIFO basis for the three main products distributed
by the company. Aphysical inventory is taken at each year-end to check the perpetual inventory records. The fol-
lowing information relates to one of its products for the month ended June 2020.
Date Units Unit Cost
June 1 Beginning inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,000 $8.10
Purchases and sales (in order)
June 3 Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000 8.15
June 4 Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
June 8 Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,000 8.20
June 9 Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,000
June 15 Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000 8.40
June 18 Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,000 8.25
June 20 Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,000
June 29 Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000 8.10
June 30 Ending inventory (per count) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,500
Required
a. Reconstruct the perpetual inventory record for this product.
b. Prepare eight journal entries (in chronological order) for the above five purchases and three sales. Assume
that the selling price is $22 per unit. Also prepare a
c. Prepare the income statement ending with gross margin. Compute the gross profit as a percentage of sales
from this income statement.
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