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General Accounting Discussions: Adjusting Entries for Inventory - HELP! PLEASE!!!

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  1.  
    • CommentAuthorralucam
    • CommentTimeOct 2nd 2009
     
    I have a problem and I'm a little confused.
    I have a Trial Balance Sheet and I have to make the Adjusting Entries, so that I can Make the Adjusted Trial Balance, then the Income Statement, and then the Balance Sheet.
    In my problem, it says that: the value of the Invetory at the end of the year is $3,550,000.
    In the Trial Balance Sheet, I have:
    Inventory = $4,000,000
    Sales = $12,000,000
    Purchases = $5,000,000
    Accounts Receivable = $1,500,000
    Supplies = $200,000
    I don't know exactly which account I should debit with $450,000, is I'm crediting Inventory with $450,000. And how should I relate these adjusting entries to COGS?
    Please, help me if you can! I'd really appreciate that!
    Thank you!
  2.  
    I teach accounting. You can send quetions through my email aprilles0ler@gmail.com
    • CommentAuthorRazzy
    • CommentTimeOct 17th 2009
     
    Sale=12,000,000
    COGS= Opening Stock+Purchases+Carriage Inwards-Returns outwards
    Your Purchases =5,000,000 Opening stock=4,000,000
    5,000,000+4,000,000=9,000,000
    Closing sock=3,550,000
    Creditors=200,000 Debtors=1,500,000
  4.  
    hmmm.. not sure i'm following razzy - and maybe i'm oversimplifying, but my inventory adjustment usually debits material cost account.

    good luck either way!
  5.  
    I am not that specialize in the field of accounting business. But know about a site which clarify all the information in a good way.http://www.avicennaaccounting.com/
  6.  
    You need to do an adjusting entry using the Income Summary account in this way:

    debit Income Summary : 450,000
    credit Inventory : 450,000

    The effect of the adjusting entry reduces your inventory account by 450,000 to reflect the value of the inventory at the end of the year which is $3,550,000.

    Therefore, the adjusted trial balance has Inventory account at $3,550,000. But you also debit Income Summary at $450,000 so it will balances. This will increase COGS by $450,000. Thus, net income will be reduce by the same amount. As it relates to the Balance Sheet, the Equity account will be reduced by the same amount also ($450,000).

    I cannot compute the figure for COGS because you haven't provide the beginning balance of the Inventory account.
    COGS= Beginning Inventory balance + Purchases - Ending Inventory balance

    I hope this will help........

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