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QUESTION 4: P6-4A Sandoval Skateshop Ltd. reports the following inventory transactions for its skateboards for the month of April. The company uses a perpetual inventory

QUESTION 4: P6-4A Sandoval Skateshop Ltd. reports the following inventory transactions for its skateboards for the month of April. The company uses a perpetual inventory system.

Date

Explanation

Units

Unit Cost

Total Cost

Apr.1

Beginning inventory

30

$50

$1,500

6

Purchases

15

45

675

9

Sales

(35)

14

Purchases

20

40

800

20

Sales

(25)

28

Purchases

20

35

700

P6-5A Information for Sandoval Skateshop Ltd. is presented in P6-4A. Use the same inventory data and assume that the company uses the perpetual inventory system.

Instructions

(a) Determine the cost of goods sold and cost of ending inventory using average cost. (Use unrounded numbers in your calculations but round to the nearest cent for presentation purposes in your answer.)

(b) When the company counted its inventory at the end of April, it counted only 24 skateboards on hand. What journal entry, if any, should the company make to record this shortage?

(c) If the company had not discovered this shortage, identify what accounts would be overstated or understated and by what amount. Ignore the effect of income taxes.

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