FASHION BLUE
LIMITED
Fashion blue Limited hired you as Accounts Receivable and Accounts
Payable Manager, the company carries out business of readymade
garments through large shops in the major cities of
UK
Its inventory leder account balances at December 31, 2017 under the
perpetual inventory system was £ 7,341,000 only. Its owner Mr.
Kaizer expected a small inventory shortfall due to damage and petty
theft but consider this shortfall to be
excessive.
After joining Fashion Blue Limited you discovered the following
issues in the inventory management of Fashion Blue
Limited:
1) Goods costing £ 3,000 were invoiced to Ebrahim
Limited for £ 4,250 on December 29, 2017 on FOB basis. The goods
were actually despatched to the customer on January 2,
2018..
2) Included in the physical count were goods worth £
2,000 which were held on behalf of a third
party.
3) Goods costing £ 4,100 purchased on credit from
Morris & Co. were received on December 28, 2017 and included in
the physical count. However, the purchase had not been
recoorded.
4) On December 23, 2017 goods costing £ 4,000 were
purchased on credit from Mubina Supplies. The purchase was recorded
on December 27, 2017 i.e. when the goods were lifted by the
transport company appointed by Fashion Blue Limited from the
warehouse of Mubina Supplies. The goods arrived on Januart 3,
2018.
5) List of inventory at a shop situated in London had
been undercasted by £
900.
6) On December 25, 2017 goods costing £ 31,000 were
sold on credit to Skims Industries for £ 50,000. The goods were
shipped on December 28, 2017 and were received by the customer on
January 2,
2018.
7) Goods costing £ 25,000 had been returned to Aberto
Garments on December 30, 2017. A credit note were received from the
supplier on January 5, 2018 and entered in the books in January
2018. No payment had been made for the goods prior to their
return.
8) Goods sold to a customer Mr. Hales were recorded in
inventory ledger account at the sale price of £ 7,800. The goods
were sold a cost plus
30%
Required:
a) Determine the value of inventory that should be
recorded in the balance sheet as on December 31,
2017
b) Reconcile the ledger balance with the physical
record to determine the shortage (if
any)
c) Prepare the adjusting entries that should be
recorded in the books of Fashion Blue Limited, in December
2017.
Physical count mentioned in point
2
Need urgent help and answer..
a) Computation of value of inventory included in Balance sheet as Dec 31 , 2017
= £7,341,000- £3,000 -£2,000+£4,100+£900-£31,000-£25,000-£7,800
= £7,277,200.
Assumption:
1. Assume goods lifted by transporter recorded as goods in transit
2. Assume goods shipped to skim industry recorded as goods in transit (point no.6)
3. Assume goods returned on Dec 30, 2017 is recorded when credit note received.
4. Goods to customers Mr Hales was recorded in inventory at £
7,800.
b) Reconciliation ledger balance with physical stock
Particulars | Amount | Remarks |
Ledger balance | £ 7,279,000 | |
Add, Invoice goods on FOB terms | £ 3000 | Not owned by company,(Sold) |
Add: Goods held on behalf of client | £2000 | Third party Goods |
Less, Goods in transit | (£4,000) | owned by Company, because goods took by company transporter |
Physical stock | £7,280,000 | |
Note: physical stock includes those which are not owned by clients. | ||
c) Adjusting entries
Journal | Debit | Credit | |
1 |
Inventory Account |
£ 900 | |
To inventory adjustment account | £900 | ||
Account Receivable account | £7,800 | ||
To inventory account | £7,800 | ||
Problem 8-2
Blue Company, a manufacturer of small tools, provided the
following information from its accounting records for the year
ended December 31, 2017.
Inventory at December 31, 2017 (based on physical count of
goods in Blue’s plant, at cost, on December 31, 2017)
$1,494,150
Accounts payable at December 31, 2017
1,278,600
Net sales (sales less sales returns)
8,729,500
Additional information is as follows.
1.
Included in the physical count were tools billed to a customer
f.o.b. shipping point on...
Cullumber Company, a manufacturer of small tools, provided the
following information from its accounting records for the year
ended December 31, 2017.
Inventory at December 31,
2017 (based on physical count of goods in Cullumber’s plant, at
cost, on December 31, 2017)
$1,467,950
Accounts payable at December
31, 2017
1,182,000
Net sales (sales less sales
returns)
7,990,400
Additional information is as follows.
1.
Included in the physical
count were tools billed to a customer f.o.b. shipping point on
December 31,...
4. Baker's Accounting Emporium, a manufacturer of amazing accounting components, provided the following information from its accounting records for the year ended December 31, 2018. Inventory at December 31, 2018 (Physical count at cost) $2,590,000 Accounts payable at December 31, 2018 Net sales (sales less sales returns) 1,900,000 16,680,000 Additional information is as follows. a) Goods received from a vendor on December 29, 2018, were included in the physical count. However, the related $21,500 vendor invoice was not included in...
Blossom Company asks you to review its December 31, 2017, inventory values and prepare the necessary adjustments to the books. The following information is given to you. 1. Blossom uses the periodic method of recording inventory. A physical count reveals $446,291 of inventory on hand at December 31, 2017. 2. Not included in the physical count of inventory is $25,498 of merchandise purchased on December 15 from Browser. This merchandise was shipped f.o.b. shipping point on December 29 and arrived...
Exercise 8-5 (Part Level Submission) Sandhill Company asks you to review its December 31, 2017, inventory values and prepare the necessary adjustments to the books. The following information is given to you 1. Sandhill uses the periadic method of recording inventory. A physical count reveals $352,335 of inventory on hand at December 31, 2017. 2. Not included in the physical count arrived in January. The invoice arrived and was recorded on December 31 inventory $20,130 of merchandise purchased on December...
Blossom Company asks you to review its December 31, 2017,
inventory values and prepare the necessary adjustments to the
books. The following information is given to you.
1.
Blossom uses the periodic method of recording inventory. A
physical count reveals $446,291 of inventory on hand at December
31, 2017.
2.
Not included in the physical count of inventory is $25,498 of
merchandise purchased on December 15 from Browser. This merchandise
was shipped f.o.b. shipping point on December 29 and arrived...
Problem # 3 (Inventory Errors) At December 31, 2016, McGlaggen Corporation reported current assets of $638,000 and current liabilities of $384,000. The following items may have been recorded incorrectly. McGlaggen uses the periodic method. 1. Goods purchased costing $10,000 were shipped f.o.b. destination by a supplier on December 26. McGlaggen received and recorded the invoice on December 31, 2016 but the goods were not included in McGlaggen’s physical count of inventory because they were not received until January 2, 2017....
Windsor Company took a physical inventory on December 31 and
determined that goods costing $189,800 were on hand. Not included
in the physical count were $26,130 of goods purchased from Pelzer
Corporation, f.o.b. shipping point, and $23,420 of goods sold to
Alvarez Company for $30,660, f.o.b. destination. Both the Pelzer
purchase and the Alvarez sale were in transit at year-end. What
amount should Windsor report as its December 31
inventory?
December 31 inventory
$
Exercise 8-2
In your audit of...
Coronado Company asks you to review its December 31, 2017,
inventory values and prepare the necessary adjustments to the
books. The following information is given to you.
1.
Coronado uses the periodic method of recording inventory. A
physical count reveals $305,357 of inventory on hand at December
31, 2017.
2.
Not included in the physical count of inventory is $17,446 of
merchandise purchased on December 15 from Browser. This merchandise
was shipped f.o.b. shipping point on December 29 and arrived...
Exercise 8-25 (Part Level Submission) At December 31, 2016, Bridgeport Corporation reported current assets of $404,870 and current liabilities of $197,500. The following items may have been recorded incorrectly 1. Goods purchased costing $21,690 were shipped f.?.b. Shipping point by a supplier on December 28, Bridgeport received and recorded the invoice on December 29, 2016, but the goods were not included in Bridgeport's physical count of inventory because they were not received until January 4, 2017. 2. Goods purchased costing...