Reference no: EM132903355
Pedro Penduko, trading as Penduks Co, completed his first year of trading as a toy wholesaler on December 31,2021. He is worried about his end-of-year physical and cut-off procedures.
The inventory account balance at December 31,2021 under the perpetual of inventory method, was ?314,800. His physical count, However, revealed the cost of inventory on hand on December 31,2021 to be only ?293,600. While Pedro expected a small inventory shortfall due to breakage and petty theft, he considered this shortfall to be excessive.
Upon investigating reasons for inventory "shortfall". Pedro discovered the following:
- Goods costing ?3,200 were sold on credit to Maria for ?5,200 on December 26,2021 on FOB destination terms. The goods were still in transit at December 31,2021. Penduks Co. recorded the sale on December 26,2021 but did not include these goods in the physical count.
- Goods costing ?8,400 were sold on credit to Elmo Co. for ?12,800on December 24, 2021 on FOB shipping terms. The goods were shipped on December 28,2021. The sale was unrecorded at December 31,2021 and Penduks Co. did not include these goods in the physical count.
- Goods costing ?6,000 had been returned to Camilo Co. on December 31,2021. A credit note was received from the supplier on January 5,2022. No payment had been made for the goods prior to their return.
- Included in the physical count were ?8,800 of goods held on consignment
- Goods costing ?3,640 were purchased on credit from Ambrosio Co. on December 24,2021 and received on December 28,2021. The purchased was unrecorded at December 31,2021 but not goods were included in the physical count.
- Goods costing ?1,600 were purchased on credit from Gregorio Supplies on transport company on December 27,2021. The purchase was recorded on December 27,2021 but since the goods had not yet arrived, Penduks Co. did not include these goods in the physical count.
- On December 31,2021 Penduks Co. had unsold goods costing ?14,800 out on consignment. These goods were not included in the physical count
Problem 1: The adjusted inventory balance per ledger
a. ?307,240
b. ?318,000
c. ?304,400
d. ?309,600
Problem 2: The adjusted inventory balance per count
a. ?307,240
b. ?318,000
c. ?304,400
d. ?309,600
Problem 3: The adjusted inventory shortage
a. Nil
b. ?2,840
c. ?2,360
d. ?8,400