In: Accounting
On December 31, 2019, of the current year Smith Enterprises physically counted $1,500,000 of inventory. The following additional information is also available:
Question 1: For letter A, does Smith adjust or not adjust the physical count for the in-transit goods? Explain.
Question 2: For letter B, does Smith adjust or not adjust the physical count for the in-transit goods? Explain.
Question 3: For letter C, does Smith adjust or not adjust the physical count for the in-transit goods? Explain.
Question 4: For letter D, does Smith adjust or not adjust the physical count for the in-transit goods? Explain.
Question 5a: Consider the in-transit items described above and further assume that Smith’s general ledger reports a Merchandise Inventory balance at 12/31/2019 of $1,750,000. What adjusting entry should Smith prepare at 12/31/2019 to record this inventory shrink? (Make sure to provide the calculations for the number you use in your journal entry!)
Date: MM/DD/YY
Dr. Account………...XX
Cr. Account…………...XX
Question 5b: Consider your entry in 5a, what could have caused this shrink?