Reference no: EM133146451

Question 1 - On December 31, 20X1, Fuller Inc. conducted a physical count of inventory on its premises. The inventory was valued at $714,555. The following information is also available relating to inventory:

i. On December 31, 20X1, Fuller had possession of $17,525 in inventory on consignment from a supplier, Datatech Inc.

ii. On January 2, 20X2, Fuller received inventory from a supplier with the terms FOB Shipping Point. The inventory has a cost of $6,540 and was shipped on December 29, 20X1.

iii. Fuller shipped inventory to a customer on December 30, 20X1. The inventory had a cost of $12,520 and was received by the customer on January 5, 20X2. The goods were shipped FOB Shipping Point.

iv. Eisley Equipment is holding inventory on consignment from Fuller. That inventory has a cost of $18,400.

Required -

a. Determine the correct amount at which Fuller should report its inventory as of December 31, 20X1.

b. Assume that Fuller uses a PERIODIC inventory system. If Fuller does not perform the necessary inventory adjustment as indicated in (a), what will be the effect off Fuller's reported cost of goods sold (i.e., understated or overstated and by how much)?

Question 2 - The following inventory information is for Darren Company:

Beginning Inventory 150 units @ $15

Purchases 750 units @ $15

Ending Inventory 225 units

Sales for the year totaled $15,000.

Required -

a. Assume that a periodic inventory system is used. Compute the cost of goods sold.

b. Assume that a perpetual inventory system is used. The perpetual records indicate that the sales of $15,000 represent 625 units with a total cost of $9,375. How much inventory shrinkage would be recorded for the year?

c. Use the same information given in (b). How much inventory shrinkage would be recorded using the periodic method?