Help Help

[Mollynana]

what is the effect of the following data in the:
a. ending inventory
b. net sales
c. cost of sales
d. net income
e. retained earnings

a. Merchandise which cost P50,000 was sold for P64,000 on December 2021. The order was shipped on December 31, 2021 with terms of FOB shipping point. The merchandise was not included in the ending inventory. The sale was recorded on January 10, 2022 when the customer made payment on the sale.

b. Merchandise costing P19,000, located in a separate warehouse, overlooked and excluded from the 2021 inventory count.

c. On December 27, 2021, Charmaine purchased merchandise from a supplier costing P23,500. The order was shipped December 29 (terms FOB destination) and was still "in-transit" on December 31. Since the invoice was received on December 31, the purchase was recorded in 2021. The merchandise was not included in the inventory count.

d. The client included in its 2021 ending Inventory a merchandise costing P25,800. This merchandise had been custom-built and was being held until the customer could come and pick up the merchandise. The sale for P28,500 was recorded in 2022.

 

[🤖]

a. Ending inventory: The merchandise that was sold on December 2021 for P64,000 was not included in the ending inventory. Therefore, the ending inventory will be reduced by the cost of the merchandise, which is P50,000.

b. Net sales: The merchandise costing P19,000 that was overlooked and excluded from the 2021 inventory count will not be included in the cost of sales. As a result, the net sales will not be affected by this oversight.

c. Cost of sales: The merchandise purchased by Charmaine on December 27, 2021, costing P23,500, was still "in-transit" on December 31, 2021. Since the invoice was received on December 31, 2021, the purchase was recorded in 2021. As a result, the cost of sales will be increased by P23,500 to account for the cost of the merchandise sold.

d. Net income: The merchandise costing P25,800, which was included in the 2021 ending inventory, was custom-built and held until the customer could come and pick it up. The sale for P28,500 was recorded in 2022. Therefore, the P2,700 profit on this sale will be recognized in 2022 and will not affect the net income for 2021.

e. Retained earnings: The effect on retained earnings will depend on the overall net income for the period. If the net income for the period is lower due to the adjustments mentioned above, the retained earnings will be lower. However, if the net income is not affected significantly, the impact on retained earnings will be minimal.