Culver Company, a manufacturer of small tools, provided the following informatio
ID: 2342600 • Letter: C
Question
Culver Company, a manufacturer of small tools, provided the following information from its accounting records for the year ended December 31, 2017.
Additional information is as follows.
Prepare a schedule of adjustments as of December 31, 2017, to the initial amounts per Culver’s accounting records.
Explanation / Answer
all adjustments are based on sales recognition in case of FOB shipping point and FOB destination point.
in FOB shipping point the title of goods usually passes from the buyer to the seller at the shipping point,and in case FOB destination point the title of goods wil transfer at destination point.so in case of sale at f.o.b at destination point goods in transit should include in the inventory of seller.
so in view of above discussion the given adjustment should be made under following
1.
Sales should not recognized because the goods are not yet shipped to a customer on December 31, 2017.
2.
Goods were in transit is considered as purchases even they are in transit. because the purchase is as per f.o.b shipping point So inventory should include $76,650. And corresponding accounts payable should also increase by $76,650.
3.
Work in process inventory costing $30,650 was sent to an outside processor for plating on December 30, 2017 should include in inventory because they are not sold.
4.
Good returned of costing 32,650 should include in inventory. And sales should decrease by its invoice value $47,650.
5.
Sale of $42,650 should not record because the Tools shipped to a customer on f.o.b. destination on December 26, 2017, and goods were in transit at December 31, 2017 so it should include in its inventory at cost of $26,650.
6.
Goods, with an invoice cost of $27,650, received from a vendor at 5:00 p.m. on December 31, 2017 should include ins inventory.
7.
Goods received from a vendor on December 26, 2017, were included in the physical count. Accounts payable should also include $56,650..
8.
The freight charges were related to purchase of inventor, so inventory should include $8,650 and accounts payable should also include$ 8,650.
so iafter adjusting abouve entries the figure will be following
1.
Sales should not recognized because the goods are not yet shipped to a customer on December 31, 2017.
2.
Goods were in transit is considered as purchases even they are in transit. because the purchase is as per f.o.b shipping point So inventory should include $76,650. And corresponding accounts payable should also increase by $76,650.
3.
Work in process inventory costing $30,650 was sent to an outside processor for plating on December 30, 2017 should include in inventory because they are not sold.
4.
Good returned of costing 32,650 should include in inventory. And sales should decrease by its invoice value $47,650.
5.
Sale of $42,650 should not record because the Tools shipped to a customer on f.o.b. destination on December 26, 2017, and goods were in transit at December 31, 2017 so it should include in its inventory at cost of $26,650.
6.
Goods, with an invoice cost of $27,650, received from a vendor at 5:00 p.m. on December 31, 2017 should include ins inventory.
7.
Goods received from a vendor on December 26, 2017, were included in the physical count. Accounts payable should also include $56,650..
8.
The freight charges were related to purchase of inventor, so inventory should include $8,650 and accounts payable should also include$ 8,650.
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