The Company has the following merchandise inventory. on it\'s books and records.

Question

The Company has the following merchandise inventory. on it's books and records. A physical inventory was taken and some of the parts were not found. The company adjusts the shortage into cost of goods sold. Inventory should also be adjusted to the lower of cost or market at 12/31 Quanti 7 Part 8 B-1452 9B-1556 10 B-8552 11 G-5123 12 J-5512 13 M-1552 14 S-7532 15 Y-4466 16 Total Cost 115.00 225.00 138.00 74.00 1,012.00 105.00 889.00 958.00 Total 23000 33750 16560 12950 30360 2100 136906 162860 S 418,486.00 Counted Quantity 200 148 118 170 Current Replacement 116 225 100 75 125 105 890 952 2588 200 150 120 175 20 154 170 20 150 170 17

Explanation / Answer

Adjustment to the Cost of goods sold is done on the lowest basis of Cost price or the current replacement price. So, the adjustment required of the shortage to the cost of goods sold account is :

Part Shortage Cost current replacement Adjustment required B-1556 150-148=2 225 225 2*225=$450 B-8552 120-118=2 138 100 2*100=$200 G-5123 175-170=5 74 75 5*74=$370 s-7532 154-150=4 889 890 4*889=$3556 Total $4,576   

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