Your audit client presented the following information on December 31, 2018: Net purchases (all on account) - P2,400,000; Inventory, December 31, 2018 - P350,000. The audited balance of inventory on December 31, 2017 is P260,000. Additional information: 

 

a. The  December  31, 2018  inventory  balance is  based  on the  inventory  count conducted  on  the entity's  warehouse.  All inventories in the warehouse at that date were included, while inventories not in the warehouse were not included in the count. 

b. A purchase of inventory for P6,000 was recorded on December 28, 2018 and the goods are still in transit as of December 31. The related freight term is FOB Shipping Point. 

c. Goods (costing P20,000) consigned by your client to another entity are not yet sold as of December 31, 2018. No journal entry was prepared by your client upon the transfer of goods to the consignee. 

d. Goods costing P8,000 were sold for P15,000 on December 28, 2018. The freight term is FOB Shipping Point. 

e. A purchase of goods costing P13,500 on December 31, 2018 was not recorded until the receipt of the goods on January 3, 2019. The term is FOB Shipping Point. 

f. Goods consigned to your client was recorded as a purchase upon receipt of the goods on December 10, 2018. The cost of the goods is P30,000. The amount of inventory left in the warehouse as of December 31, 2018 is P12,000. 

g. Goods costing P17,500  was sold  for P22,000  on  December 30, 2018;  term is FOB Destination.  The  sale was  recorded on January 5, 2019 when the goods were already received by the customer.

 

REQUIRED:

1. What is the correct net purchases for 2018? *

 

2. What is the correct balance of inventory as of December 31, 2018? *

 

3. Prepare a compound adjusting journal entry (from a-g), assuming that the books of 2018 are still open (do not use Income Summary or related account)

Answer rating: 100% (QA)

Answers to your Audit Client Inventory Adjustments 1 Correct Net Purchases for 2018 Purchase Calcula... View the full answer