Question

Reagan Corporation is a wholesale distributor of truck replacement parts. Initial amounts taken from Reagan's records are as follows: Inventory at December 31 (based on a physical count of goods in Reagan's warehouse on December 31) $1,370,000 $ Accounts payable at December 31: Vendor Baker Company Charlie Company Dolly Company Eagler Company Full Company Greg Company Accounts payable, December 31 Sales for the year Terms 3%, 10 days, net 30 Net 30 Net 30 Net 30 Net 30 Net 30 Amount 289,000 234,000 324,000 249,000 $1,096,000 $9,600,000 Additional Information: 1. Parts held by Reagan on consignment from Charlie, amounting to $215,000, were included in the physical count of goods in Reagan's warehouse and in accounts payable at December 31. 2. Parts totaling $34,000, which were purchased from Full and paid for in December, were sold in the last week of the year and appropriately recorded as sales of $40,000. The parts were included in the physical count of goods in Reagan's warehouse on December 31 because the parts were on the loading dock waiting to be picked up by customers. 3. Parts in transit on December 31 to customers, shipped f.o.b. shipping point on December 28, amounted to $58,000. The customer received the parts on January 6 of the following year. Sales of $64,000 to the customers for the parts were recorded by Reagan or January 2. 4. Retailers were holding goods on consignment from Reagan, which had a cost of $330,000 and a retail value of $370,000. 5. Goods were in transit from Greg to Reagan on December 31. The cost of the goods was $37,000, and they were shipped f.o.b.

Answer 1

Particulars Initial Amounts Adjustments Increase / (Decrease) Inventory Accounts Payable Sales Remarks $13,70,000 $10,96,000 $96,00,000 Since they are received on consignment basis, excluded in Inventory and $0Accounts payables Sales was recorded correctly, but the goods were at warehouse for $0 customer clearance, excluded from Inventory Though goods were removed in current year, sales was booked for next $64,000 year. So increased sales S0 Goods sent on consignment to be included in the inventory at cost Goods on FOB basis from Greg included in Inventory and corresponding $0Accounts payable Freight bill not included in value of inventory and Accounts payable. Hence so included For purchases from Baker, the payment is made within 10 days to enjoy the discount of 3%. Discount value ($289,000 x 3% $8670) is to be reduced $0 from Accounts payable and Inventory $64,000 -$2,15,000 -$2,15,000 -$40,000 $0 $0 $0 3 $3,30,000 $0 4 $37,000 $37,000 $3,200 $3,200 -$8,670 -$8,670 Total Adjustments Adjusted Amount -$1,83,470 $1,06,530 $14,76,530 $96,64,000 $9,12,530