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1. The balance in the inventory account at the beginning of the year was $250,000. Purchases of inventory during the year totaled $1,500,000. The company sold inventory that had cost $1,610,000 for $3,700,000. Based on a physical count, inventory on hand at year-end cost $120,000. Shrinkage during the year totaled $20,000. Give the adjusting journal entry

a) What amount should be reported on the 12-31-1balance sheet for the inventory account?

b) What amount should be reported on the Year 1 income statement for cost of goods sold?

c) What year end AJE should have been made assuming the company utilizes a perpetual inventory system?

2. The balance in the inventory account at the beginning of the year was $250,000. Purchases of inventory during the year totaled $1,500,000. Based on a physical count, inventory on hand at year-end cost $120,000.

a) What amount should be reported on the 12-31-1balance sheet for the inventory account?

b) What amount should be reported on the Year 1 income statement for cost of goods sold?

c) What year end AJE should have been made assuming the company utilizes the periodic system to account for inventory?

Answer 1

Qn 1

a) What amount should be reported on the 12-31-1balance sheet for the inventory account?

$120,000

b) What amount should be reported on the Year 1 income statement for cost of goods sold?

$1,630,000

c) What year end AJE should have been made assuming the company utilizes a perpetual inventory system?

Dr  COGS $20,000

Cr  Merchandise inventory $20,000

Qn 2

a) What amount should be reported on the 12-31-1balance sheet for the inventory account?

$120,000

b) What amount should be reported on the Year 1 income statement for cost of goods sold?

$1,630,000

c) What year end AJE should have been made assuming the company utilizes the periodic system to account for inventory?

Dr  COGS $250,000

Cr  Beginning inventory $250,000

Dr  COGS $1,380,000

Dr  Ending inventory $120,000

Cr  Purchases $1,500,000