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2 . HEMI s management is cost conscious and does not spend money unless the benefits exceed the amount spent. Accountant understands that physical inventory
HEMIs management is cost conscious and does not spend money unless the benefits exceed the amount spent. Accountant understands that physical inventory count is good internal control practice; however, he wants you to explain the benefit of a physical inventory count when HEMI has a perpetual inventory system and the inventory is physically protected.
Accountant wants you to evaluate the following major transactions and provide adjusting journal entries, if necessary. For each item, explain why you are or are not adjusting HEMIs current account balances and provide supporting calculations for adjustments:
a On December HEMI ordered transmissions for a total cost of $ which were shipped on December with the terms FOB Destination. This inventory was not received at yearend and has not been recorded in HEMIs accounting records.
b There is a product in inventory that cost HEMI $ which management has indicated will be sold close to its cost. Management is estimating selling price to be $ and HEMI will have to pay the transportation costs of approximately $ on behalf of its customers
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