Edinbrough Enterprises uses a perpetual inventory system. At year-end, Edinbrough takes a physical inventory and adjusts its records to agree with the physical inventory results. Following is selected financial information for 2009 for Edinbrough.
January 1 inventory.................................... $ 50,000
Merchandise purchases.............................. 695,000
December 31 inventory.............................. 25,400
Required:
(a) Compute Edinbrough’s cost of goods available for sale and Cost of Goods Sold for 2009.
(b) Assume that Edinbrough took a physical count of inventory at the end of 2009 and found only $21,850 of goods in inventory. What factors may be responsible for the $3,550 difference between Edinbrough’s perpetual inventory records and the dollar amount of inventory determined by the year-end physical count? How would Edinbrough treat the $3,550 for financial statement purposes?
(c) List four ways that a company could help prevents inventory shrinkage from theft by employees and customers. Indicate whether your prevention method would relate to employees, customers, or both.