Jaeco Corporation asks you to review its December 31, 2014 inventory values and prepare the necessary adjustments to the books. The following information is given to you.
1. Jaeco uses the periodic method of recording inventory. A physical count reveals $234,890 of inventory on hand at December 31, 2014, although the books have not yet been adjusted to reflect the ending inventory.
2. Not included in the physical count of inventory is $ 10,420 of merchandise purchased on December 15 from Sharnsi. This merchandise was shipped FOB 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 Sage on December 30, FOB 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 Sage received it on January 3.
4. Included in the count of inventory was merchandise received from Dutton on December 31 with an invoice price of $15,630. The merchandise was shipped FOB destination. The invoice, which has not yet arrived, has not been recorded.
5. Not included in inventory is $8,540 of merchandise purchased from Growler 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 Jaeco on consignment from Jackel Industries.
7. Included in inventory is merchandise sold to Kemp, FOB shipping point. This merchandise was shipped after it was counted on December 31. The invoice was prepared and recorded as a sale for $18,900 on December 31. The cost of this merchandise was $11,520, and Kemp received the merchandise on January 5.
8. Excluded from inventory was a carton labelled "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 record the rerum, but none of the returned merchandise seemed damaged.
9. Jaeco has sold $12,500 of inventory to Simply Corp. on December 15, 2014. These items were shipped FOB shipping point. The terms of sale indicate that Simply Corp. will be permitted to return an unlimited amount until May 15, 2015. Jaeco has never provided unlimited returns in the past and is not able to estimate the amount of any potential returns that Simply may make.
Instructions
(a) Determine the proper inventory balance for Jaeco Corporation at December 31, 2014.
(b) Prepare any adjusting correcting entries necessary at December 31, 2014. Assume the books have not been closed.