Exercise 6-2 Partially correct answer. Your answer is partially correct. Try aga
ID: 2591307 • Letter: E
Question
Exercise 6-2 Partially correct answer. Your answer is partially correct. Try again. Rachel Warren, an auditor with Laplante CPAs, is performing a review of Schuda Company’s inventory account. Schuda did not have a good year, and top management is under pressure to boost reported income. According to its records, the inventory balance at year-end was $740,000. However, the following information was not considered when determining that amount. Prepare a schedule to determine the correct inventory amount. (If an amount reduces the account balance then enter with a negative sign preceding the number , e.g. -15,000, or parenthesis e.g. (15,000). Enter 0 if there is no effect.) Ending inventory-as reported $ Entry field with correct answer 1. Included in the company’s count were goods with a cost of $250,000 that the company is holding on consignment. The goods belong to Harmon Corporation. Entry field with incorrect answer now contains modified data 2. The physical count did not include goods purchased by Schuda with a cost of $40,000 that were shipped FOB destination on December 28 and did not arrive at Schuda's warehouse until January 3. Entry field with incorrect answer now contains modified data 3. Included in the inventory account was $14,000 of office supplies that were stored in the warehouse and were to be used by the company’s supervisors and managers during the coming year. Entry field with incorrect answer now contains modified data 4. The company received an order on December 29 that was boxed and sitting on the loading dock awaiting pick-up on December 31. The shipper picked up the goods on January 1 and delivered them on January 6. The shipping terms were FOB shipping point. The goods had a selling price of $40,000 and a cost of $28,000. The goods were not included in the count because they were sitting on the dock. Entry field with correct answer 5. On December 29, Schuda shipped goods with a selling price of $80,000 and a cost of $60,000 to Reza Sales Corporation FOB shipping point. The goods arrived on January 3. Reza had only ordered goods with a selling price of $10,000 and a cost of $8,000. However, a sales manager at Schuda had authorized the shipment and said that if Reza wanted to ship the goods back next week, it could. Entry field with incorrect answer 6. Included in the count was $40,000 of goods that were parts for a machine that the company no longer made. Given the high-tech nature of Schuda’s products, it was unlikely that these obsolete parts had any other use. However, management would prefer to keep them on the books at cost, “since that is what we paid for them, after all.” Entry field with incorrect answer Correct inventory $ Entry field with incorrect answer Link to Text Question Attempts: 1 of 4 used Save for later Submit Answer
Explanation / Answer
Schedule to determine the correct inventory amount:
Unadjusted ending inventory:
740,000
1
Goods belong to harmon corporation
(250,000)
2
No effect, Cannot take into account, until goods are received
-
3
Office supplies cannot be considered as inventory
(17,000)
4
Add: Because the ownership of goods still remains
28,000
5
here we have Two adjustments:
shipped to reza, that means ownership still remains with sudha
60,000
Less: Reza ordered only $8,000 goods
(8,000)
6
The machine parts are no more called as inventory, we need to deduct them
(40,000)
Therefore correct inventory
513,000
Unadjusted ending inventory:
740,000
1
Goods belong to harmon corporation
(250,000)
2
No effect, Cannot take into account, until goods are received
-
3
Office supplies cannot be considered as inventory
(17,000)
4
Add: Because the ownership of goods still remains
28,000
5
here we have Two adjustments:
shipped to reza, that means ownership still remains with sudha
60,000
Less: Reza ordered only $8,000 goods
(8,000)
6
The machine parts are no more called as inventory, we need to deduct them
(40,000)
Therefore correct inventory
513,000