To practice correcting the financial statements for an inventory calculation error. (See Topic Guides A 13, 14, 37, 38)

Intermediate 1 Terry Part #5: Chapter 8 Goal: To practice correcting the financial statements for an inventory calculation error. (See Topic Guides A 13, 14, 37, 38) Information: Terry's management is afraid that an error was made when calculating COGS. Most of the calculations have already been checked by the auditors, but management still thinks that one inventory item has not been correctly recorded. They would like you to go back through the inventory calculations for that item to correct any possible mistakes. Currently they show that 7,500 units of item TC178, purchased for $12 each, were on hand at the beginning of the year, that $76o,oo0 worth of TC178 was purchased during the year, that discounts of $2,000 were earned by making early payments on these purchases, and that $3,200 worth of returns were made during the year. The records show that only 2,500 units of the beginning TC178 inventory remained at the end of the year Terry uses the perpetual LIFO system for calculating inventory. Their inventory transactions for item TC178 for the period are as follows: (NOTE that the vendor provides free shipping on all units of TC178) At the beginning of the period, 7,500 units of TC178, purchased for $12.0o each, were on hand .On Jan 15, an additional 21,0oo units were purchased for $13.00 each. .On February 28, 19,000 units were sold. . On March 14, an additional 11,000 units were purchased for $15.00 each. . On March 20, a 1.0% cash discount was earned by paying for the March 14 purchase early . On March 30, 12,500 units were sold . On July 30, 4,000 units were sold .On August 20, an additional 19,o00 units were purchased for $18.o0 each. . On September 2, 10,000 units were sold. . On December 1, 8,400 units were sold. Terry's management would like to know the effect of the sale on the following ratios Inventory Turnover (COGS/average total inventory) Current Ratio ROA