Question

Prepare any adjusting/correcting entries and ending inventory

Grouper Corporation 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. Grouper uses the periodic method of recording inventory. A physical count reveals $234,400 of inventory on hand at December 31, 2017, although the books have not yet been adjusted to reflect the ending inventory.

2. Not included in the physical count of inventory is $10,400 of merchandise purchased on December 15 from Shamsi. 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 Sage 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 $12,200 on December 31. The merchandise cost $7,370, and Sage received it on January 3.

4. Included in the count of inventory was merchandise received from Dutton on December 31 with an invoice price of $15,500. 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 $8,700 of merchandise purchased from Growler 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 $10,200 of inventory held by Grouper on consignment from Jackel Industries.

7. Included in inventory is merchandise sold to Kemp, f.o.b. shipping point. This merchandise was shipped after it was counted, on December 31. The invoice was prepared and recorded as a sale for $18,600 on December 31. The cost of this merchandise was $11,600, and Kemp received the merchandise on January 5.

8. Excluded from inventory was a carton labelled "Please accept for credit." This carton contained merchandise costing $1,600, which had been sold to a customer for $2,600. No entry had been made to the books to record the return, but none of the returned merchandise seemed damaged.

9. Grouper sold $13,000 of inventory to Simply Corp. on December 15, 2017. These items were shipped f.o.b. shipping point. The terms of sale indicate that Simply Corp. will be permitted to return an unlimited amount until May 15, 2018. Grouper has never provided unlimited returns in the past and is not able to estimate the amount of any potential returns that Simply may make.

A) Determine the proper inventory balance for Grouper Corporation at December 31, 2017.

Inventory Balance $___________

B) Prepare any adjusting/correcting entries necessary at December 31, 2017. Assume the books have not been closed. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

No.

Account Titles and Explanation

Debit

Credit

1

2

3

4

5

6

7

8

9

Answer 1

A)

Inventory as on Dec 31,2017

234400

Transaction 2

(Note:1)

10400

Transaction 3

(Note:2)

0

Transaction 4

(Note:3)

0

Transaction 5

(Note:4)

8700

Transaction 6

(Note:5)

-10200

Transaction 7

(Note:6)

-11600

Transaction 8

(Note:7)

1600

Transaction 9

(Note:8)

13000

Adjusted Inventory as on Dec 31,2017

246300

Notes:

1. Purchase is on FOB shipping point.Once it is shipped the title on goods are transferred.

Shipping is on Dec 29.To be included in inventory.

2. Sale is on FOB destination.Once the goods are received by customer the title on goods are transferred.

Receipt is on Jan 3.To be included in inventory.No adjustment in inventory required since it is already incurred.

3. Purchase is on FOB destination.Once the goods are received the title on goods are transferred.

Receipt is on Dec 31.To be included in inventory.No adjustment in inventory required since it is already incurred.

4. Goods has received on Dec 31. To be included in inventory

5. Goods received on consignment has to be excluded from inventory

6. Sale is on FOB shipping point.Once it is shipped the title on goods are transferred.

Shipping is on Dec 31.To be excluded from inventory.

7. Returned goods has to be included in inventory

8. If it is not able to estimate the returns sales should not be recognized until May 15,2018.To be included in inventory.

B)

Adjusting/Correcting entries:

No

Account titles and explanation

Debit

Credit

1

No entry

2

No entry

(Note:1)

3

Sales

12200

Accounts receivable

12200

(Note:2)

4

Purchase or Inventory

15500

Accounts payable

15500

(Note:3)

5

No entry

6

No entry

7

No entry

8

Sales return

2600

Accounts receivable

2600

(Sales return recorded)

9

No entry

Notes:

1. Purchase is on FOB shipping point.Once it is shipped the title on goods are transferred.

Shipping is on Dec 29.Sales to be recognised on dec 29..No adjustment required since sale has already recorded.

2. Sale is on FOB destination.Once the goods are received by customer the title on goods are transferred.

Receipt is on Jan 3.Sale to be recognzed on Jan 3.Sales has to be reversed since sale has recorded.

3. Once goods are received,Record the purchase.No need to wait for the invoice

4. Goods has received on Dec 31 and properly recorded on the same date.No adjustment required.

5. Sale is on FOB shipping point.Once it is shipped the title on goods are transferred.

Shipping is on Dec 31.Sale has to recognize on Dec 31 and properly recorded on the same date.No adjustment required.

6. If it is not able to estimate the returns sales should not be recognized until May 15,2018.Here, I presume that the sales has not recorded and hence no adjustment required.