ACME Distribution, Inc. December 31, 2016 Adjusting Entries Continued 3) The com

Question

ACME Distribution, Inc. December 31, 2016 Adjusting Entries Continued 3) The company takes a physical inventory count at the end of the year and adjusts their inventory and cost of goods sold if there is a difference between the inventory value determined from the actual count compared to the value in the general ledger. The information below includes the number of units counted in inventory at the end of the year and the purchases of inventory during the month. Number of units held in the company's inventory at 12/31/2016 based on a count of the inventory was 17,728 units. A listing of purchases during the month of December are as follows: Quantity Purchased Unit Cost Total Cost Date 15,000 $ 6,500 $ 7,500 $ 56,250 December 5, 2016 December 14, 2016 December 21, 2016 3.75 4.00 $26,000 4.50 $33,750 The company uses FIFO to account for its inventory cost. What is the cost of the company's ending inventory (round answer to nearest dollar and show your calculation below for full credit)? The balance in inventory per the unadjusted trial balance before making any adjustments is $76,730 What is the amount of the December 31 adjustment to inventory cost (show your calculation below for full credit)? Complete below the adjusting journal entry necessary for inventory: Account d on Debit Credit Post the above entry to the trial balance in the adjustment columns.

Explanation / Answer

1)Under FIFO,units acquired first are sold first so ending inventory is left from last purchase .

Cost of ending inventory : [7500*4.5 ]Dec21 +[6500*4]dec14 +[3728*3.75 ]dec 5

              = 33750+ 26000+ 13980

              = 73730

2)Adjustment to inventory =unadjusted balance -cost of ending inventory

         76730 -73730

            = 3000

Account Debit credit cost of goods sold 3000 merchandise inventory 3000

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