PRACTICE EXERCISES 1. Mika Sorbino, an auditor with Martinez Chartered Accountants, is performing a review Determine the correct of Sergei Company's inventory account. Sergei's did not have a good year and top manage- inventory amount. ment is under pressure to boost reported income. According to its records, the inventory (LO 1) balance at year-end was 650,000. However, the following information was not considered when determining that amount. 1. Included in the company's count were goods with a cost of 200,000 that the company is holding on consignment. The goods belong to Bosnia Corporation. 2. The physical count did not include goods purchased by Sergei with a cost of 40,000 that were shipped FOB shipping point on December 28 and did not arrive at Sergei's warehouse until January 3. 3. Included in the inventory account was 15,000 of office supplies that were stored in the warehouse and were to be used by the company's supervisors and managers during the coming year. 4. The company received an order on December 28 that was boxed and was sitting on the loading dock awaiting pick-up on December 31. The shipper picked up the goods on January 1 and delivered them on January 6. The shipping terms were FOB shipping point. The goods had a selling price of 40,000 and a cost of 30,000. The goods were not included in the count because they were sitting on the dock. on December 29, Sergei shipped goods with a selling price of 80,000 and a cost of 60,000 10 Oman Sales Corporation FOB shipping point. The goods arrived on January 3, Oman Sales had only ordered goods with a selling price of 10,000 and a cost of 8.000). However, a Sergei's sales manager had authorized the shipment and said that if Oman wanted to ship the goods back next week, it could. 6. Included in the count was 30,000 of goods that were parts for a machine that the com. pany no longer made. Given the high-tech nature of Sergei's products, it was unlikely that these obsolete parts had any other use. However, management would prefer to keep them on the books at cost, since that is what we paid for them, after all." Instructions Prepare a schedule to determine the correct inventory amount. Provide explanations for each item above, saying why you did or did not make an adjustment for each item. Scanned with CamScanner PRACTICE PROBLEMS 1. Gerald D. Englehart Company has the following inventory, purchases, and sales data for the mouth of March. Inventory: March 1 200 units ( 4.00 800 Purchases: March 10 500 units 1 4.50 2,250 March 20 400 units @ 4.75 1,900 March 30 300 units () 5.00 1,500 Sales: March 15 500 units March 25 400 units The physical inventory count on March 31 shows 500 units on hand. Instructions Under a periodic inventory system, determine the cost of inventory on hand at March 31 and the cost of goods sold for March under (a) FIFO and (b) average-cost. Scanned with CamScanner