5. Bridgemen Inc. ispreparing its 2017 yearend financial statements . Prior to anypossible adjustments from the items listed below, inventory wasvalued at $75,060, based on a physical count of the goods onhand.
- Goods valued at 11,000 are on consignment with ClarkCompany.
- Goods costing $2,800 were received from a vendor on January 4,2018. The related invoice was received and recorded on January 12,2018. The goods had been shipped on December 31, 2017, FOB shippingpoint.
- Goods costing $8,400 were shipped on December 31, FOB shippingpoint. These were delivered to the customer on January 2, 2018. Thegoods had been included in the physical count of inventory, and thesale had been recorded upon delivery to the customer.
- A shipment of goods to a customer priced at $3,500, terms FOBdestination, delivered on January 5, 2018, was not included in theinventory count at 12/31. They cost Bridgemen $2,600. The sale wasrecorded in 2017.
- An invoice from Cole Inc. for goods costing $5,500 was receivedand recorded on December 27, 2017. The related goods were shippedFOB destination on December 27 and arrived at Bridgemen’s businesson January 3, 2018.
- Goods valued at $6,500 are on consignment from Fields Corp.These goods were not included in the physical count.
- A $9,750 shipment of goods to a customer on December 30, 2017FOB destination was recorded as a sale in 2017. The goods, costing$8,250, were delivered to the customer on January 8, 2018.
5a. Justify your treatment of each ofthe above items in the calculation of ending inventory at December31, 2017
5b. Compute the proper inventory amount for the December 31,2017 balance sheet.
5c. By how much would Bridgemen’s netincome be misstated if no adjustments had been made for the itemsabove?
5d. If Bridgemen did not find thislist of possible errors until after the audit were completed, butbefore the end of 2018, prepare any necessary entry. Bridgemen usesthe periodic inventory system and assume the amounts are material.Hint: Chapter 23 could be useful…
