Determining the cost of the counted inventory


Response to the following problem:

A retail company recently completed a physical count of ending merchandise inventory to use in preparing adjusting entries. In determining the cost of the counted inventory, company employees failed to consider that $2,000 of incoming goods had been shipped by a supplier on December 31 under an FOB shipping point agreement. These goods had been recorded in Merchandise Inventory as a purchase, but they were not included in the physical count because they were in transit.

Explain how this overlooked fact affects the company's financial statements and the following ratios: return on assets, debt ratio, current ratio, and acid-test ratio.

Request for Solution File

Ask an Expert for Answer!!
Accounting Standards: Determining the cost of the counted inventory
Reference No:- TGS02134231

Expected delivery within 24 Hours