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17 download_doc-15.php - at 12/31 BE8-4 What acct entries...

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A311 (4/16/2009) BE8-3 INV t ≡ INV t-1 + INV Purch t – COGS t * - INV Impairment t Transfer of Title of goods shipping point destination “F.O.B.” = “freight on board” “title to goods transfers at” (1) Inventory “on hand” (physically present) has HEP = 200,000 (2) Purchase of inventory under FOB/SP terms with HEP = 15,000 was in transit at 12/31. (3) Sale of inventory under FOB/Dest terms with HEP INV = 22,000 was in transit at 12/31. What is INV t ? (≈ what acct entries are necessary?) (1) Inventories……… + x opposite COGS…………. .. + x signs x = Inventory in hand – unadjusted inventory balance 200,000 (“cost”) ? (2) Inventories……………15,000 Accts Payable………. .(15,000) To adjust for unrecorded inventory purchase under FOB/SP terms in transit at 12/31. (3) AR…………………. .(30,000) Sales Rev…………….30,000 INV………………….22,000 COGS……………….(22,000) Adjust for improperly recorded sales transaction with FOB/Dest terms which was still in transit
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Unformatted text preview: at 12/31. BE8-4 What acct entries are necessary to correct for prior year inventory overstatement of $110,000 and current year inventory overstatement of $45,000? Selle Buye-110,000 INV t ≡ (INV PR t-1 + PPA t-1 ) + INV Purch t – COGS t – INV Impairment t INV t-1 current year Compound acct entry to correct…(made at t) Inventories…………….(45,000)* Retained Earnings……. .110,000** COGS…………………(65,000) * Corrects current YE inventory for $45,000 overstatement ** Corrects prior YE inventory for $110,000 overstatement When preparing comparative FSs, prior year COGS should be restated by $110,000 to its correct amount BE8-6 FIFO assumption inventory valuation Acq Date Units Units Sold End Units LCM per unit 4-1 250 (250) $10 Beg INV = 2500 4-15 400 (400) $12 4-23 350 (50) 300 x $13 = 3900 4-30 FIFO (700) 300 Inventory INV 4.30 = INV 4.1 + Purch – COGS* - INV Impair 3900 2500 9350...
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This note was uploaded on 04/18/2011 for the course BUS 311 taught by Professor Palmer during the Winter '11 term at Indiana.

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17 download_doc-15.php - at 12/31 BE8-4 What acct entries...

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