Lola, owner of Aboy Hardware Company, was concerned about her control of inventory. In December 20X7, she installed a computerized perpetual inventory system. In April, her accountant brought her the following information for the first 3 months of 20X8:

Sales ............................................................... $700,000

Cost of goods sold ...........................................610,000

Beginning inventory (per physical count) .....135,000

Merchandise purchases ..................................630,000

Lola had asked her public accounting firm to conduct a physical count of inventory on April 1. The CPAs reported inventory of $140,000.

1. Compute the ending inventory shown in the books by the new perpetual inventory system.

2. Provide the journal entry to reconcile the book inventory with the physical count. What is the corrected cost of goods sold for the first 3 months of 20X8?

3. Do your calculations point out areas about which Lola should be concerned? Why?