Question

You have been provided with the following information for LnS Shoe Outlet which accounts for its inventory using the periodic system. Its financial year ends September 30. All purchases and sales are made on account.

- Physical count at beginning of September 30, 2020 valued inventory of shoes at $469,780.

- Included in the physical count was shoes purchased for $20,840 on September 17 from Kmart. The shoes were shipped f.o.b. destination point on September 30 and arrived October 7. The invoice was received and recorded on appropriately.

- Shoes purchased from Walmart on September 25 for $17,080 and shipped f.o.b. destination were received on September 30 after inventory had been counted. The invoice was received and recorded appropriately.

- On September 29, shoes were received from Leather Made with an invoice price of $31,260. The shoes were shipped to LnS Shoe Outlet f.o.b. destination. The invoice, which had not yet arrived, had not been recorded on September 30.

- Chef shoes sold to Holiday Resorts on September 29, f.o.b. destination, were shipped on September 30. The invoice was prepared and recorded as a sale on September 30 for $25,600. The shoes had a cost of $14,700 and Holiday Resorts received the shoes on October 6.

- Shoes costing $92,000 were purchased and received from S&S Shoe Store on September 30 accompanied by an invoice annotated ’40 % on consignment’. The invoice was received and recorded appropriately.

- A box containing returned shoes (incorrect size) and labelled ‘Please Accept for Credit’ was placed in the front of the wharehouse on September 30 after the physical count was done. These shoes which cost $3,000 had been sold to a customer for $5,200. No entry had been made in the books to reflect the returns.

- Football shoes were sold to TTFA f.o.b. shipping point for $37,800 on September 30 (last transaction on the day). The cost of these shoes were $23,040. The shoes were shipped on October 1 and received by TTFA on October 4.

Required:

A. Compute the correct inventory balance for LnS Shoe Outlet at the end of its trading day, September 30, 2020.

B. Prepare any necessary correcting journal entries to adjust inventory and related accounts to their proper amounts at September 30, 2020. Assume the books have not yet been closed.

Answer 1

	In the Books of LnS Shoe Outlet
			(Amount in $ )
	Particular	Amount	Amount
	Opening Balance		469780
	Add :- Purchase
	Purchased from Kmart	20840
	Purchased from Walmart	17080
	Purchased from Leather Made	31260
	Purchased from S & S Shoe	92000	161180
	Sales Return		3000
	Less :- sold		633960
	Sold to Holiday Resort	14700
	Sold to TTFA	23040	37740
	Closing Balance		596220
	Notes
	1) All the Purchase Transactions are on F.O.B Basis hence it is booked on 30th September
	2) As the give question is of Inventory which is always valued at cost the Sale value of all the transactions are irrelveant
	3) Hence sales return also booked at Purchased.
	4) As Sale Value is immaterial Sales & Sales return are booked on Cost basis.