Question

Seemore Lens Company (SLC) sells contact lenses FOB destination. For the year ended December 31, the company reported Inventory of $82,000 and Cost of Goods Sold of $444,000.

1. Included in Inventory (and Accounts Payable) are $12,400 of lenses SLC is holding on consignment.
2. Included in SLC’s Inventory balance are $6,200 of office supplies held in SLC’s warehouse.
3. Excluded from SLC’s Inventory balance are $9,200 of lenses in the warehouse, ready to send to customers on January 2. SLC reported these lenses as sold on December 31, at a price of $17,400.
4. Included in SLC’s Inventory balance are $3,600 of lenses that were damaged in December and will be scrapped in January, with zero realizable value.

Required:

Prepare the table showing the balances presently reported for Inventory and Cost of Goods Sold, and then displaying the adjustment(s) needed to correctly account for each of items (a)-(d), and finally determining the appropriate Inventory and Cost of Goods Sold balances. (Enter any decreases to account balances with a minus sign.)

Answer 1

			inventory	COGS
Present balance			82,000	444,000
a.			-12,400	0
b.			-6,200	0
c.			9,200	-17,400
d.			-3,600	3,600
Appropirate balance			69,000	430,200
office supplies are not inventory hence excluded
for inventory damange we pass following entry DR cost of goods sold and CR inventory hence increase COGS
for c sale will take place when goods are delivered