Inventoriable Costs—Error Adjustments
Craig Company asks you to review its December 31,
2007, inventory values and prepare the necessary adjustments to the books. The following information is
given to you.
1. Craig uses the periodic method of recording inventory. A physical count reveals $234,890 of
inventory on hand at December 31, 2007.
2. Not included in the physical count of inventory is $13,420 of merchandise purchased on December
15 from Browser. This merchandise was shipped f.o.b. shipping point on December 29 and
arrived in January. The invoice arrived and was recorded on December 31.
3. Included in inventory is merchandise sold to Champy on December 30, f.o.b. destination. This merchandise
was shipped after it was counted. The invoice was prepared and recorded as a sale on
account for $12,800 on December 31. The merchandise cost $7,350, and Champy received it on
January 3.
4. Included in inventory was merchandise received from Dudley on December 31 with an invoice
price of $15,630. The merchandise was shipped f.o.b. destination. The invoice, which has not yet
arrived, has not been recorded.
5. Not included in inventory is $8,540 of merchandise purchased from Glowser Industries. This merchandise
was received on December 31 after the inventory had been counted. The invoice was
received and recorded on December 30.
6. Included in inventory was $10,438 of inventory held by Craig on consignment from Jackel Industries.
7. Included in inventory is merchandise sold to Kemp f.o.b. shipping point. This merchandise was
shipped after it was counted. The invoice was prepared and recorded as a sale for $18,900 on December
31. The cost of this merchandise was $10,520, and Kemp received the merchandise on January 5.
8. Excluded from inventory was a carton labeled “Please accept for credit.” This carton contains merchandise
costing $1,500 which had been sold to a customer for $2,600. No entry had been made to
the books to reflect the return, but none of the returned merchandise seemed damaged.
Instructions
(a) Determine the proper inventory balance for Craig Company at December 31, 2007.
(b) Prepare any correcting entries to adjust inventory to its proper amount at December 31, 2007.
Assume the books have not been closed.
