Question

First Choice Ltd. completed the following merchandising transactions in the month of May 2021. At the beginning of May, First Choice’s ledger showed Cash $6,200; Accounts Receivable $1,500; Inventory $3,100; Common Shares $7,000; and Retained Earnings $3,800. First Choice has experienced a return rate of 2% of sales and uses a perpetual inventory system.

May   1       Purchased merchandise on account from Depot Wholesale Supply Ltd. for $4,940, terms 1/10, n/30, FOB shipping point.
3       Freight charges of $125 were paid by the appropriate party on the merchandise purchased on May 1.
4       Sold merchandise on account to Ry Company for $3,100, terms n/30, FOB destination. The cost of the merchandise was $2,000.
7       Freight charges of $78 were paid by the appropriate party on the May 4 sale.
8       Received a $140 credit from Depot Wholesale Supply when merchandise was returned.
9       Paid Depot Wholesale Supply in full.
11       Purchased supplies for $350 cash.
14       Received payment in full from Ry Company for merchandise sold on account on May 4.
15       Collected $860 of the accounts receivable outstanding at the beginning of the month. All accounts were originally sold on terms of n/30.
18       Purchased merchandise from Harlow Distributors Inc. for $1,900, terms n/30, FOB destination.
21       Freight of $43 was paid by the appropriate party on the May 18 purchase of merchandise.
22       Sold merchandise to various customers for $5,800 cash. The cost of the merchandise was $3,400.
29       Paid a $86 cash refund to customers for returned merchandise. The cost of the returned merchandise was $51. It was restored to inventory.
31       A physical inventory count was taken and determined that there was $4,380 of inventory on hand. Prepare any adjustment required.

Answer 1

Inventory