Ho Designs experienced the following events during Year 1, its first year of operation: 1. Started the

Question:

Ho Designs experienced the following events during Year 1, its first year of operation:
1. Started the business when it acquired $70,000 cash from the issue of common stock.
2. Paid $41,000 cash to purchase inventory.
3. Sold inventory costing $37,500 for $56,200 cash.
4. Physically counted inventory showing $3,200 inventory was on hand at the end of the accounting period.


Required
a. Determine the amount of the difference between book balance and the actual amount of inventory as determined by the physical count.
b. Explain how differences between the book balance and the physical count of inventory could arise. Why is being able to determine whether differences exist useful to management?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Introductory Financial Accounting for Business

ISBN: 978-1260299441

1st edition

Authors: Thomas Edmonds, Christopher Edmonds

Question Posted: