Craig Company asks you to review its December 31, 2014, inventory values and pre
ID: 2448085 • Letter: C
Question
Craig Company asks you to review its December 31, 2014, inventory values and prepare the necessary adjustments to the books. The following information is given to you.
8 Excluded from inventory was a carton labeled “Please accept for credit.” This carton contains merchandise costing $1,961 which had been sold to a customer for $3,398. No entry had been made to the books to reflect the return, but none of the returned merchandise seemed damaged.
Prepare any correcting entries to adjust inventory to its proper amount at December 31, 2014. Assume the books have not been closed.
List of accounts to use.
Accounts Payable
Accounts Receivable
Cash
Cost of Goods Sold
Finished Goods Inventory
Inventory
No Entry
Prepaid Insurance
Purchases
Purchase Discounts
Purchase Discounts Lost
Purchase Returns and Allowances
Raw Materials
Sales Returns and Allowances
Sales Revenue
Withholding Taxes Payable
Work-in-Process
No.
Account Titles and Explanation
Debit
Credit
1. Craig uses the periodic method of recording inventory. A physical count reveals $307,001 of inventory on hand at December 31, 2014. 2. Not included in the physical count of inventory is $17,540 of merchandise purchased on December 15 from Browser. This merchandise was shipped f.o.b. shipping point on December 29 and arrived in January. The invoice arrived and was recorded on December 31. 3. Included in inventory is merchandise sold to Champy on December 30, f.o.b. destination. This merchandise was shipped after it was counted. The invoice was prepared and recorded as a sale on account for $16,730 on December 31. The merchandise cost $9,606, and Champy received it on January 3. 4. Included in inventory was merchandise received from Dudley on December 31 with an invoice price of $20,428. The merchandise was shipped f.o.b. destination. The invoice, which has not yet arrived, has not been recorded. 5. Not included in inventory is $11,162 of merchandise purchased from Glowser Industries. This merchandise was received on December 31 after the inventory had been counted. The invoice was received and recorded on December 30. 6. Included in inventory was $13,642 of inventory held by Craig on consignment from Jackel Industries. 7. Included in inventory is merchandise sold to Kemp f.o.b. shipping point. This merchandise was shipped after it was counted. The invoice was prepared and recorded as a sale for $24,702 on December 31. The cost of this merchandise was $13,750, and Kemp received the merchandise on January 5. .8 Excluded from inventory was a carton labeled “Please accept for credit.” This carton contains merchandise costing $1,961 which had been sold to a customer for $3,398. No entry had been made to the books to reflect the return, but none of the returned merchandise seemed damaged.
Prepare any correcting entries to adjust inventory to its proper amount at December 31, 2014. Assume the books have not been closed.
List of accounts to use.
Accounts Payable
Accounts Receivable
Cash
Cost of Goods Sold
Finished Goods Inventory
Inventory
No Entry
Prepaid Insurance
Purchases
Purchase Discounts
Purchase Discounts Lost
Purchase Returns and Allowances
Raw Materials
Sales Returns and Allowances
Sales Revenue
Withholding Taxes Payable
Work-in-Process
No.
Account Titles and Explanation
Debit
Credit
Explanation / Answer
Sl No Date Account Title Debit Credit 2 05-Dec-14 No entry is required for $17,540 Because material did not received. 3 31-Dec-14 No entry is required for $16,730 Only subtract 16730 from tota physiacl count. 4 31-Dec-14 Purchase 20428 Accounts Payable 20428 (Inventory received are recorded) 5 31-Dec-14 Add quantity 11,162 with physical count. 31-Dec-14 Purchase 11162 Accounts Payable 11162 6 31-Dec-14 No adjustment is required 7 31-Dec-14 No entry is required. subtract the amount from physical count. 8 31-Dec-14 Sales Returns and Allowances 3398 Accounts Receivable 3398 (sales return recorded) 31-Dec-14 Cost of Goods Sold 1981 Income Summary 1981 (Cost of goods sold on sales return adjusted)