Question

In: Accounting

Diana Gomez Corporation, a manufacturer of cowboy boots, provided the following information from its accounting records...

Diana Gomez Corporation, a manufacturer of cowboy boots, provided the following information from its accounting records for the year ended December 31, 20X1.
Inventory at December 31, 20X1 (based on a physical count of goods on December 31, 20X1)
$
1,700,000
Accounts payable at December 31, 20X1
1,150,000
Net sales (sales less returns and allowances)
9,500,000
Additional information is as follows:
a. Work-in-process inventory costing $30,000 was sent to an outside processor for hand-tooling on December 30, 20X1, and was therefore not included in physical inventory.
b. Goods received from Smith, Inc., a vendor, on December 27, 20X1, were included in the physical count; however, the invoice from Smith ($43,000) was not included in accounts payable at December 31, 20X1, because the accounts payable department never received its copy of the receiving report.
c. Goods received from another vendor just before the plant closed on December 31, 20X1, were reported on a receiving report dated January 2, 20X2. The goods, invoiced to Gomez at $83,000, were not included in the physical count, but the invoice was included in the December 31, 20X1, accounts payable balance.
d. Included in the physical count were boots billed to a customer f.o.b. shipping point (title transfers when goods are shipped) on December 31, 20X1. These boots had a cost of $25,000 and were recorded as sales of $35,000. The shipment was on Gomez’s loading dock waiting to be picked up by the trucking company.
e. Boots shipped to a customer f.o.b. destination (title transfers when goods are received) on December 28, 20X1, were in transit at December 31, 20X1, and had a cost of $40,000. Gomez issued a sales invoice for $58,000 on January 3, 20X2, upon notification of receipt by the customer.
f. Boots returned by customers and held on December 31, 20X1, in the returned goods area pending inspection were not included in the physical count. On January 5, 20X2, after inspection, the boots were returned to inventory and credit memos were issued to the customers. The boots, costing $27,000, were originally invoiced for $39,000.
Required:
Using the following format, prepare a schedule of adjustments as of December 31, 20X1, to the amounts Gomez initially reported in its accounting records. Show separately the effect, if any, of each of the six transactions on the December 31, 20X1, amounts. (Amounts to be deducted must be entered with a minus sign)
Problems 10-1 (template)
Inventory
Accounts Payable
Net Sales
Initial Amounts
Adjustments –
Increase (Decrease)
(a)
(b)
(c)
(d)
(e)
(f)
Total Adjustments
Adjusted Amounts

Solutions

Expert Solution

Solution:

Si No Particulars Inventory Accounts
Payable
Net Sales
Initial Amounts (A) $ 17,00,000 $ 11,50,000 $ 95,00,000
Adjustments - Increase (Decrease)
a Off-Site Work -in - Progress $       30,000
b Excluded Invoice $       43,000
c Goods Omitted From Count $       83,000
d F.O.B Shipping Printing -$       35,000
e F.O.B Destination $       40,000
f Returned Goods $       27,000 -$       39,000
Total Adjustments (B) $    1,80,000 $       43,000 -$       74,000
Adjusted Amounts (A+B) $ 18,80,000 $ 11,93,000 $ 94,26,000

A - Goods sent for Job Work should be included in Closing Inventory as Goods Sent on Job Work.

B - Goods were received before 31 Dec so it should be included in closing Inventory, as the same is already counted in Physical Count no need to adjust in Inventory. However Accounts Payable need to be increase as party bill is not booked.

C - Goods were received before 31 Dec so it should be included in closing Inventory, as the same is not counted in Physical Count so need to adjust in Inventory. However Accounts Payable is already updated so no need for further adjustments.

D – Goods lying at loading dock should be counted as inventory, as the same is already counted in Physical Count no need to adjust in Inventory. However the same is also recorded as sales so sales need to be reversed.

E – Goods tittle is not transferred as the same is in transit on 31 December and tittle will be transferred on receipt by the party as goods are sold on FOB destination basis. This should be included in inventory and sales should not be recorded until receipt by the party. Inventory should be adjusted to as these goods are not counted in physical count and there is no need to adjust sale as the same is booked on 3rd January.

F – Goods returned by customer before 31 December should be included in closing inventory at cost (i.e. $ 27000 ) and reduced from sales as sales return at invoice price (i.e. $ 39000).


Related Solutions

Diana Gomez Corporation, a manufacturer of cowboy boots, provided the following information from its accounting records...
Diana Gomez Corporation, a manufacturer of cowboy boots, provided the following information from its accounting records for the year ended December 31, 2017. Inventory at December 31, 2017 (based on a physical count of goods on December 31, 2017) $ 1,700,000 Accounts payable at December 31, 2017 1,150,000 Net sales (sales less returns and allowances) Additional information is as follows: A- Work-in-process inventory costing $30,000 was sent to an outside processor for hand-tooling on December 30, 2017, and was therefore...
Diana Gomez Corporation, a manufacturer of cowboy boots, provided the following information from its accounting records...
Diana Gomez Corporation, a manufacturer of cowboy boots, provided the following information from its accounting records for the year ended December 31, 2017. Inventory at December 31, 2017 (based on a physical count of goods on December 31, 2017) $ 1,700,000 Accounts payable at December 31, 2017 1,150,000 Net sales (sales less returns and allowances) 9,500,000 Additional information is as follows: Work-in-process inventory costing $30,000 was sent to an outside processor for hand-tooling on December 30, 2017, and was therefore...
Kingbird Company, a manufacturer of small tools, provided the following information from its accounting records for...
Kingbird Company, a manufacturer of small tools, provided the following information from its accounting records for the year ended December 31, 2020. Inventory at December 31, 2020 (based on physical count of goods in Kingbird’s plant, at cost, on December 31, 2020) $1,419,220 Accounts payable at December 31, 2020 1,295,400 Net sales (sales less sales returns) 8,926,300 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,...
Sunland Company, a manufacturer of small tools, provided the following information from its accounting records for...
Sunland Company, a manufacturer of small tools, provided the following information from its accounting records for the year ended December 31, 2020. Inventory at December 31, 2020 (based on physical count of goods in Sunland’s plant, at cost, on December 31, 2020) $1,467,950 Accounts payable at December 31, 2020 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,...
Culver Company, a manufacturer of small tools, provided the following information from its accounting records for...
Culver 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 Culver’s plant, at cost, on December 31, 2017) $1,594,780 Accounts payable at December 31, 2017 1,165,100 Net sales (sales less sales returns) 8,629,100 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,...
Question 4 StorageTek Corporation gathered the following information from its accounting records for the year ended...
Question 4 StorageTek Corporation gathered the following information from its accounting records for the year ended December 31, 2016, prior to adjustment:     Net credit sales for the year = $1,150,000     Accounts Receivable (Dec 31, 2016) = $93,000     Allowance for Uncollectible Accounts, prior to adjustment (Dec 31, 2016) = $6,000 debit balance     StorageTek Corporation uses the allowance method of accounting for bad debts and estimates bad debts at 3% of net credit sales.    Prepare the adjusting...
Problem 3 The following information is provided from the Forza Corporation’s accounting records. ​ 1) Issued...
Problem 3 The following information is provided from the Forza Corporation’s accounting records. ​ 1) Issued 10,000 shares of $1 par common stock at $25 a share. 2) In order to prevent a hostile takeover the company reacquired 7,500 shares for $20 per share as treasury stock. 3) The hostile takeover did not succeed, and the company reissued 5,500 of the treasury shares of $21 per share. 4) The remaining treasury shares were reissued for $22 per share and an...
Financial Statement Elements: Manufacturer The following selected information was extracted from the 20x1 accounting records of...
Financial Statement Elements: Manufacturer The following selected information was extracted from the 20x1 accounting records of Lone Oak Products: Raw material purchases $175,000 Direct labor 254,000 Indirect labor 109,000 Selling and administrative salaries 133,000 Building depreciation 80,000 Other selling and administrative expenses 195,000 Other factory costs 344,000 sales revenue ($130perunil) 1,495,000 *Seventy five percent of the company's building was devoted to production activities; the remaining 25 percent was used for selling and administrative functions. Inventory data: January1 December 31 Raw...
LaBBC Company has provided the following information from their records:                               &
LaBBC Company has provided the following information from their records:                                                                          Purchases                                         Sales                                                                                 Units             Unit Cost              Units     Selling Price/Unit Mar       1         Beginning inventory          100                  $50              3         Purchase                             60                  $60              4         Sales                                                                                   70                   $100            10         Purchase                           200                  $70            16         Sales                                                                                   80                   $110            19         Sales                                                                                   80                   $110            25         Sales                                                                                   50                   $110            30         Purchase                             40                  $75 Using the inventory and sales data above, to complete the below inventory schedule under average cost method and prepare the journal...
Millner Corporation has provided the following data from its activity-based costing accounting system:Millner Corporation has provided...
Millner Corporation has provided the following data from its activity-based costing accounting system:Millner Corporation has provided the following data from its activity-based costing accounting system:        ACTIVITY COST POOLS          TOTAL COST                     TOTAL ACTIVITY DESIGNING PRODUCTS                $1,372,4478       7,798       PRODUCT DESIGN HOURS SETTING UP BATCHES                    33,300              740        BATCH SET UP ASSEMBLING PRODUCTS             126,160            6,640      ASSEBLY HOURS The activity rate for the "designing products" activity cost pool is closest to
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT