Adj. Entries

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1) Co. uses the FIFO Inventory Method in valuing inventory. The inventory balance of $340,000 was based on a physical count at 12/31/2018. Based on your analysis, you have noted that $10,000 of marketing games that belonged to Pellston Inc. was included in the account. You also note that $5,600 of goods shipped to the Co. f.o.b. destination were in transit on December 31, 2018 & included in the physical count.

2)You note during the review of sales, that a rebate was issued for the 2018 Income Tax Game to encourage sales. 36,400 games were sold. Customers can mail in their receipt and receive a $1 rebate per game. It is estimated that 48% of customers will send in the rebate. The rebate expires on January 31, 2019. To date, 12,800 rebates have been refunded. Without any direction, the accounting clerk debited Miscellaneous Selling Expense and credited Cash for the $12,800. The management of co. would prefer to have this type of expense in a separate account (Rebate Expense) so they can properly analyze for future ideas.

3) Co. has a straight tax rate of 30%. Income tax expense is Net Income before taxes times 30%. (Hint: Prepare the Income Statement up to Net Income before Taxes and then record this adjusting journal entry.)