Question

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, 2020. These tools had a cost of $31,700 and were billed at $40,700. The shipment was on Sunland’s loading dock waiting to be picked up by the common carrier.
2.		Goods were in transit from a vendor to Sunland on December 31, 2020. The invoice cost was $76,700, and the goods were shipped f.o.b. shipping point on December 29, 2020.
3.		Work in process inventory costing $30,700 was sent to an outside processor for plating on December 30, 2020.
4.		Tools returned by customers and held pending inspection in the returned goods area on December 31, 2020, were not included in the physical count. On January 8, 2021, the tools costing $32,700 were inspected and returned to inventory. Credit memos totaling $47,700 were issued to the customers on the same date.
5.		Tools shipped to a customer f.o.b. destination on December 26, 2020, were in transit at December 31, 2020, and had a cost of $26,700. Upon notification of receipt by the customer on January 2, 2021, Sunland issued a sales invoice for $42,700.
6.		Goods, with an invoice cost of $27,700, received from a vendor at 5:00 p.m. on December 31, 2020, were recorded on a receiving report dated January 2, 2021. The goods were not included in the physical count, but the invoice was included in accounts payable at December 31, 2020.
7.		Goods received from a vendor on December 26, 2020, were included in the physical count. However, the related $56,700 vendor invoice was not included in accounts payable at December 31, 2020, because the accounts payable copy of the receiving report was lost.
8.		On January 3, 2021, a monthly freight bill in the amount of $8,700 was received. The bill specifically related to merchandise purchased in December 2020, one-half of which was still in the inventory at December 31, 2020. The freight charges were not included in either the inventory or in accounts payable at December 31, 2020.

Prepare a schedule of adjustments as of December 31, 2020, to the initial amounts per Sunland’s accounting records. (If an amount reduces the account balance then enter either with a negative sign preceding the number, e.g. -15,000 or in parenthesis, e.g. (15,000).)

SUNLAND COMPANY Schedule of Adjustments December 31, 2020
		Inventory		Accounts Payable		Net Sales
Initial amounts		$1,467,950		$1,182,000		$7,990,400
Adjustments:
1.
2.
3.
4.
5.
6.
7.
8.
Total adjustments
Adjusted amounts		$		$		$

Answer 1

• Answer -

Identify the adjusted balances of the given accounts after adjustments :

Details	Ending Inventory ($)	Accounts payable($)	Net Sales ($)
Initial amounts	$1,467,950	$1,182,000	$7,990,400
Adjustments :
1.	-	-	( $40,700)
2.	$76,700	$76,700	-
3.	$30,700	-	-
4.	$32,700	-	( $47,700)
5.	$26,700	-	-
6.	$27,700	-	-
7.	-	$56,700	-
8.	$4,350	$8,700	-
Total adjustments	$1,98,850	$1,42,100	( $88,400)
Adjusted amounts	$16,66,800	$13,24,100	$79,02,000

• Adjusted amounts = Initial amounts + Adjustments.
• Total adjustments =  Adjusted amounts - Initial amounts .

Note =  

1.   The $31,700 of tools on the load dock was correctly incorporated in the physical count.

  The sale was not supposed to be recorded until the goods are selected up by the common carrier.

Therefore,

no adjustments are made to the inventory, but sale must be reduced by the billing amount.

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