Analyze results of physical count of inventory and calculate cost of goods sold.
(LO 1,2,7,8)
Barney’s Flowerpot Company uses a perpetual inventory system, so the cost of goods sold is recorded and the inventory records are updated at the time of every sale. The company’s accounting records showed the following related to May 2008 transactions
| Units | Cost | ||
| Beginning inventory, May 1 | 300 | $ 600 | |
| + | Purchases during June | 4,000 | 8,000 |
| = | Goods available for sale | 4,300 | $8,600 |
| – | Cost of goods sold | 3,300 | 6,600 |
| = | Ending inventory May 31 | 1,000 | $2,000 |
On May 31, 2008, Barney conducted a physical count of its inventory and discovered there were actually 900 units of inventory on hand.
Required
a. Using the information from the physical count, correct Barney’s cost of goods sold for June.
b. How would this correction change the financial statements for the year?
c. What are some possible causes of the difference between the inventory amounts in Barney’s accounting records and the inventory amount from the physical count?
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