Capwell Corporation uses a periodic inventory system. The company\'s ending inve

Question

Capwell Corporation uses a periodic inventory system. The company's ending inventory on December 31, 2014, its fiscal-year end, based on a physical count, was determined to be $330000. Capwell's unadjusted trial balance also showed the following account balances: Purchases, $603000; Accounts payable; $198000; Accounts receivable, $201000; Sales revenue, $854000

The internal audit department discovered the following items:

Goods valued at $30200 held on consignment from Dix Company were included in the physical count but not recorded as a purchase.

Purchases from Xavier Corporation were incorrectly recorded at $41900 instead of the correct amount of $16200. The correct amount was included in the ending inventory.

Goods that cost $26400 were shipped from a vendor on December 28, 2014, terms f.o.b. destination. The merchandise arrived on January 3, 2015. The purchase and related accounts payable were recorded in 2014.

One inventory item was incorrectly included in ending inventory as 110 units, instead of the correct amount of 1100 units. This item cost $37 per unit.

Goods shipped to a customer f.o.b. destination on December 25, 2014, were received by the customer on January 4, 2015. The sales price was $40000 and the merchandise cost $23000. The sale and corresponding accounts receivable were recorded in 2014.

Goods shipped from a vendor f.o.b. shipping point on December 27, 2014, were received on January 3, 2015. The merchandise cost $20000. The purchase was not recorded until 2015.

Required:

1. Determine the correct amounts for 2014 ending inventory, purchases, accounts payable, sales revenue, and accounts receivable.

2. Calculate cost of goods sold for 2014.

Corrected Ending Inventory

Corrected Purchases Balance

Corrected Accounts Payable Balance

Corrected Accounts Receivable Balance

Corrected Sales Balance

Cost of Goods Sold

Explanation / Answer

Inventory purchases Accounts Payable Sales Account receivable $ $ $ $ $ Bal as per trial     3,30,000        6,03,000                    1,98,000                        8,54,000                        2,01,000 1) Goods purchase on consignment of $ 30200 not to include in inventory       -30,200 2) Purchase from Xavier corporation Recorded at $ 41900 instead of $ 16200          -25,700                      -25,700 3) Goods in Transit of purchase at a term of FOB destination $ 26400, Recorded in Books          -26,400                      -26,400 4) Inventory of one item recorded at 110 unit instead of 1100 units , Costing $ 37 per unit         36,630 5) Sale of $ 40000 sold on FOB destination, cost of goods $ 32000         32,000                          -40,000                          -40,000 6) Goods in transit of purchase at a term of FOB shipping $         20,000            20,000                        20,000 Corrected balance at year end 2014     3,88,430        5,70,900                    1,65,900                        8,14,000                        1,61,000 2. Cost of goods Sold $ Purchases     5,70,900 Less:- Inventory     3,88,430 Cost of goods sold     1,82,470

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