Capwell Corporation uses a periodic inventory system, the balance sheet approach to estimate uncollectibles, and the allowance method to estimate sales returns. All sales are credit sales and all purchases are credit purchases. The company's ending inventory on December 31, 2018, its fiscal- year end, based on a physical count, was determined to be $332,000. Capwell's unadjusted trial balance also showed the following account balances: Purchases, net $680,000; Accounts payable; $240,000; Accounts receivable, $255,000; Sales revenue, $860,000 The internal audit department discovered the following items 1. Goods valued at $38,000 held on consignment from Dix Company were included in the 2. Purchases from Xavier Corporation were incorrectly recorded at $52,000 instead of the 3. Goods that cost $31,000 were shipped from a vendor on December 28, 2018, terms f.o.b. physical count but not recorded as a purchase correct amount of $25,000. The correct amount was included in the ending inventory. destination. The merchandise arrived on January 3, 2019. The purchase and related accounts payable were recorded in 2018 One inventory item was incorrectly included in ending inventory as 160 units, instead of the correct amount of 1,300 units. This item cost $50 per unit. 4. 5. The 2017 balance sheet reported inventory of $412,000. The internal auditors discovered 6. Goods shipped to a customer f..b. destination on December 25, 2018, were received by the 7. Goods shipped from a vendor f.o.b. shipping point on December 27, 2018, were received on that a mathematical error caused this inventory to be understated by $68,000. This amount is considered to be material. Comparative financial statements will be issued. customer on January 4, 2019. The sales price was $46,000 and the merchandise cost $25,000. The sale and corresponding accounts receivable were recorded in 2018. January 3, 2019. The merchandise cost $24,000. The purchase was not recorded until 2019 8. Double counted inventory of $11,000 in ending inventory 9. Purchases of $22,000 were not recorded 10. On December 24, Capwell sold Deed Inc. merchandise with a cost of $2,500 for $3,000 Because of a shipping backlog, Capwell held the inventory until January. Capwell recorded the revenue on December 24. 11. A sales return of $10,000 was incorrectly debited to sales revenue. Both the credit sale and the return occured during 2018. 12. The allowance for uncollectibles is estimated to be 10% of the year-end balance of accounts receivable. Capwell used the same estimated for the last 5 years. AFDA was incorrectly recorded at$ 24,000. The beginning balance in AFDA was $20,000 and write-offs during the year were $3,000 13. The firm fail to record the adjusting entry for sales returns. Capwell estimates that 5% of gross sales will be returned. During 2018, customers returned merchandise with an invoice price of $20,000. Customers also returned merchandise with an invoice price of $2,000 from sales made during 2017. The customers that returned the merchandise did not pay within the discount period. The beginning balance in AFSR is $17,000 14. The beginning balance in AP was $210,000
