Saver Store, located in Adelaide, is registered for GST at 10% and uses a perpetual inventory system. At the end of the first financial year on 31 May 2021, Oscar Willy, the business owner, was arguing with Paula Jenner, his business partner, on how to determine the value of the ending inventory.

The inventory ledger account recorded by Oscar showed a closing balance of $645,100. However, Paula’s physical stock count on 31 May 2021 was $626,600. Both insisted they were each right and the other was wrong.

They asked you to review the business records that revealed the following transactions:

1. Goods valued at $7,500 plus GST were consigned to an agent on 31 May 2021 just before they closed business for the day. Since the goods were already at the agent’s warehouse, Paula did not include the goods in the physical count. Oscar did not do any recording of this in the inventory ledger.

2. Goods on consignment from a manufacturer worth $15,400 inclusive GST were at the shop on 31 May 2021 so Paula included them in the physical count but Oscar did not do any recording of this in the inventory ledger.

3. Oscar had recorded an invoice of $27,500 inclusive GST from a Brisbane supplier for goods shipped on ExW terms on 28 May 2021. On 31 May 2021, the goods were not in the shop so Paula did not include the goods in the physical count.

4. Oscar had also recorded a $31,900 invoice inclusive GST to a customer in Perth for goods shipped on DPP terms on 27 May 2021 and expected to reach the customer on 6 June 2021. Cost of the goods sold worth $19,000 plus GST was recorded by Oscar and were excluded by Paula from the physical count.

REQUIRED:

Show all workings and explanations to secure maximum marks.

1. Calculate Saver Store’s correct ending inventory at 31 May 2021 by reconciling its inventory ledger with the physical count.

[9 marks]

2. Prepare the general journal to correct errors in the inventory ledger recording, where necessary. Provide a narration to explain each journal entry.

Answer rating: 100% (QA)

Answer a Inventory reconciliation with physical count Particul... View the full answer