Inventory Management and Cost Flow in Accounting

School: New York University - Course: ACCT-UB MISC - Subject: Accounting

Chapter 7 - Part 1 Handout Costs Included in Inventory Based on its physical count of inventory in its warehouse at year-end, December 31, 2020, Madison Company planned to report inventory of $34,500.During the audit, the independent CPA uncovered the following additional information: a.Goods from a supplier costing $700 are in transit with UPS on December 31, 2020.The terms are FOB shipping point.Because these goods had not yet arrived, they were excluded from the physical inventory count.ADD b.Madison delivered samples costing $1,800 to a customer on December 27, 2020, with the understanding that they would be returned to Madison on January 15, 2021.Because these goods were not on hand, they were excluded from the inventory count.ADD c.On December 31, 2020, goods in transit to customers, with terms FOB shipping point, amounted to $6,500 (expected delivery date January 10, 2021).Because the goods had been shipped, they were excluded from the inventory count. EXCLUDE d.On December 31, 2020, goods in transit to customers, with terms FOB destination, amounted to $1,500 (expected delivery date January 10, 2021). Because the goods had been shipped, they were excluded from the inventory count.ADD e.Madison only includes the invoice price in the value of their inventory.The auditor uncovered these additional costs: i.Freight on goods purchased from vendors = $500ADD ii.Freight on goods sold to customers = $300EXCLUDE iii.Inspection Costs = $125ADD How much should Madison report as ending inventory?

Recording Purchase Discounts On February 2, Hamm Manufacturing Corp. purchased $40,000 worth of inventory, on credit terms 3/10 n/30. On February 10, Hamm paid for the inventory, taking advantage of all available discounts. Prepare the journal entry to record the inventory purchase on account. Debit and credit the accounts affected Feb. 2Inventory40000 AP40000 Ensure the equation still balances and debits = credits Assets=Liabilities+Stockholders' Equity Prepare the journal entry to record the payment of the accounts payable. Debit and credit the accounts affected Feb. 10AP40000 Cash38800 Inventory1200 Ensure the equation still balances and debits = credits Assets=Liabilities+Stockholders' Equity