Kevin Rocks is a wholesale distributor of automotive replacement parts. Initial
ID: 2522355 • Letter: K
Question
Kevin Rocks is a wholesale distributor of automotive replacement parts. Initial amounts taken from Kevin Rocks’ accounting records are as follows:
Inventory on December 31, 2016 (based on physical count of goods in Kevin Rocks warehouse on December 31, 2016)
$ 1,150,000
Sales in 2016
$ 9,000,000
Accounts Payable at December 31, 2016
Vendor
Terms
Amount
Baker Company
2% 10 days, net 10
$ 265,000
Dolly Company
Net 30
$210,000
Eager Company
Net 30
$300,000
Full Company
Net 30
$225,000
Greg Company
Net 30
$1,000,000
Additional information is as follows:
1) Parts held on consignment from Charlie to Kevin Rocks, the consignee, amounting to $155,000 were included in the physical count of goods in Kevin Rocks’ warehouse on December 31, 2016, and in accounts payable at December 31, 2016.
2) $22,000 of parts which were purchased from Full were paid for in December 2016, were sold in the last week of 2016 and appropriately recorded as sales of $28,000. The parts were included in the physical count of goods in Kevin Rocks’ warehouse on December 31, 2016, because the parts were on the loading dock waiting to be picked up by customers.
3) Parts in transit to customers on December 31, 2016, shipped FOB shipping point on December 28, 2016, amounted to $34,000. The customers received the parts on January 7, 2017. Sales of $40,000 to the customers for the parts were recorded by Kevin Rocks on January 3, 2017.
4) Retailers were holding $210,000 at cost ($250,000 at retail) of goods on consignment from Kevin Rocks at their stores on December 31, 2016.
5) Goods were in transit from Greg to Kevin Rocks on December 31, 2016. The cost of goods was $25,000 and they were shipped FOB shipping point on December 29, 2016.
6) A quarterly freight bill in the amount of $2,000 specifically relating to merchandise purchases in December 2016, all of which was still in the inventory at December 31, 2016, was received on January 4, 2017. The freight bill was not included in either the inventory or in accounts payable at December 31, 2016.
7) All of the purchases from Baker occurred during the last 7 days of the year. These items have been recorded in accounts payable and accounted for in the physical inventory at cost before discount. Kevin Rocks’ policy is to pay invoices in time to take advantage of all cash discounts, adjust inventory accordingly, and record accounts payable, net of cash discounts.
Required:
Prepare a schedule of adjustments to the initial amounts of inventory, accounts payable, and sales. Show the effect, if any, of each of the transactions separately and indicate if the transactions would have no effect on the amounts.
I need help.I included the template needed for the assignement. Thank you. (Edited)
Inventory on December 31, 2016 (based on physical count of goods in Kevin Rocks warehouse on December 31, 2016)
$ 1,150,000
Sales in 2016
$ 9,000,000
Explanation / Answer
Working:
Inventory Accounts Sales Payable Initial Amounts: 1150000 1000000 9000000 Adjustments : Increase / (Decrease) 1 -155000 2 -22000 3 40000 4 210000 5 25000 6 2000 2000 7 -5300 -5300 Total adjustments 54700 -3300 40000 Adjusted Amounts 1204700 996700 9040000Related Questions
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