Question

Teal Company asks you to review its December 31, 2017, inventory values and prepare the necessary adjustments to the books. The following information is given to you.

1.		Teal uses the periodic method of recording inventory. A physical count reveals $399,313 of inventory on hand at December 31, 2017.
2.		Not included in the physical count of inventory is $22,814 of merchandise purchased on December 15 from Browser. This merchandise was shipped f.o.b. shipping point on December 29 and arrived in January. The invoice arrived and was recorded on December 31.
3.		Included in inventory is merchandise sold to Champy on December 30, f.o.b. destination. This merchandise was shipped after it was counted. The invoice was prepared and recorded as a sale on account for $21,760 on December 31. The merchandise cost $12,495, and Champy received it on January 3.
4.		Included in inventory was merchandise received from Dudley on December 31 with an invoice price of $26,571. The merchandise was shipped f.o.b. destination. The invoice, which has not yet arrived, has not been recorded.
5.		Not included in inventory is $14,518 of merchandise purchased from Glowser Industries. This merchandise was received on December 31 after the inventory had been counted. The invoice was received and recorded on December 30.
6.		Included in inventory was $17,745 of inventory held by Teal on consignment from Jackel Industries.
7.		Included in inventory is merchandise sold to Kemp f.o.b. shipping point. This merchandise was shipped on December 31 after it was counted. The invoice was prepared and recorded as a sale for $32,130 on December 31. The cost of this merchandise was $17,884, and Kemp received the merchandise on January 5.
8.		Excluded from inventory was a carton labeled “Please accept for credit.” This carton contains merchandise costing $2,550 which had been sold to a customer for $4,420. No entry had been made to the books to reflect the return, but none of the returned merchandise seemed damaged; Teal will honor the return.

Answer 1

Event	Remarks	Amount ($)
1	Physical counting merchandise inventory on hand at December 31, 2017	$         399,313
2	Inventory shipping point on December 29 and arrived in January. (Inventory transit for purchase transaction) This inventory needs to included in the physical counting inventory.	$           22,814
3	This inventory sold on f.o.b. destination. Inventory does not reaches to destination point. Therefore, This inventory is owned by the company and already included in the physical counting inventory. (Hint: Adjustment entry for reversal of sales should be recorded.)	$                    -
4	This inventory purchased on f.o.b. destination. Inventory does reaches to destination point. Therefore, This inventory is owned by the company and already included in the physical counting inventory. (Hint: Adjustment entry for reversal of purchase should be recorded.)	$                    -
5	This inventory was received on December 31 but still not included. This inventory is owned by the company. This inventory needs to included in the physical counting inventory.	$           14,518
6	Inventory held by company for consignment from Jackel Industries. This inventory is owned by the Jackel Industries. This inventory needs to deducted from the physical counting inventory.	$         (17,745)
7	This inventory sold on f.o.b. shipping point. Inventory does reaches to shipping point. Therefore, This inventory is owned by the Kemp (Customer). This inventory needs to deducted from the physical counting inventory.	$         (17,884)
8	This inventory returned by customer. This inventory is owned by the company. This inventory needs to included in the physical counting inventory. (Hint: Adjustment entry for sales return should be recorded.)	$             2,550
	Corrected merchandise inventory balance on December 31, 2017	$         403,566