6th Edition

ISBN: 9781260664386

Author: PHILLIPS, LIBB

Publisher: MCG

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The transaction analysis is done with the help of the accounting equation. The basic accounting equation is alternatively known as the balance sheet equation is based on the double-entry system which says that for each transaction happening in a business…

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Textbook Question

Chapter 7, Problem 3E

Determining the Correct Inventory Balance

Seemore Lens Company (SLC) sells contact lenses FOB destination. For the year ended December 31, the company reported Inventory of $70,000 and Cost of Goods Sold of $420,000.

a. Included in Inventory (and Accounts Payable) are $10,000 of lenses held on consignment.
b. Included in the Inventory balance are $5,000 of office supplies held in SLC’s warehouse.
c. Excluded from the Inventory balance are $8,000 of lenses in the warehouse, ready to send to customers on January 1. SLC reported these lenses as sold on December 31, at a price of $15,000.
d. Included in the Inventory balance are $3,000 of lenses that were damaged in December and will be scrapped in January, with no recoverable value.

Required:

Create a table showing the balances presently reported for Inventory and Cost of Goods Sold, and then displaying the adjustment(s) needed to correctly account for each of items (a)–(d), and finally determining the appropriate Inventory and Cost of Goods Sold balances.

E7-3 Recording Journal Entries to Correct Inventory Misreporting

Refer to the information in E7-2.

Required:

For each item, (a)–(d), prepare the journal entry to correct the balances presently reported. If a journal entry is not required, indicate so.

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Chapter 7, Problem 2E

Chapter 7, Problem 4E

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Chapter 7 Solutions

FUNDAMENTALS OF FINANCIAL ACCOUNTING

Ch. 7 - What are three goals of inventory management?Ch. 7 - Describe the specific types of inventory reported...Ch. 7 - The chapter discussed four inventory costing...Ch. 7 - Which inventory cost flow method is most similar...Ch. 7 - Where possible, the inventory costing method...Ch. 7 - Contrast the effects of LIFO versus FIFO on ending...Ch. 7 - Contrast the income statement effect of LIFO...Ch. 7 - Several managers in your company are experiencing...Ch. 7 - Explain briefly the application of the LCM rule to...Ch. 7 - Prob. 10Q

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Solution Summary: The author explains how to prepare the journal entry to correct the inventory balances.

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