b> for 2016, Walmart shows an adjustment for inventories of (703M), however on balance sheet, inventories...

b> for 2016, Walmart shows an adjustment for inventories of (703M), however on balance sheet, inventories declined from 45141M to 44469M, a difference of 672M. explain the 703M adjustment and offer few examples of why the adjustment differs from the change in the inventory balance

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Expert Solution

The adjustment made of 703M must have been of Cost of Goods Sold.
What happens is that Beginning Inventory is increased by the amount of Purchases, and decreased by the amount of Purchase Returns & Allowances and by the amount of amount of Cost of Goods Sold.
The decrease (difference) between beginning inventory balance and ending inventory balance is LESS than the adjustment for cost of goods sold.
This means that Inventory have been purchased too.
703M adjustment is for Cost of Goods Sold. Ending Inventory is physically counted and valued and the difference between unadjusted inventory balance and physically counted value is adjusted to Cost of Goods Sold. This 703M is recorded on credit side of Finished goods inventory.
Change in Inventory (672M) differs from the adjustment amount of 703M because:

>There must have been inventory purchases of around 31M

>Some Goods have been returned as Purchased return.

>Purchase discount and allowances have also decreased Inventory balance, not just the adjustment of 703M.

ekkarill92 answered 1 year ago

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