Accounting Help for Final

[Godwynn]

I'm on the final problem which must be turned in tomorrow before we receive the final exam. I ran into a problem during the adjustment phase.

The problem uses the Periodic Inventory System and my beginning Merchandise Inventory is $20,000. At the end of the month, the actual balance on hand is $16,000. The adjustment must be made to Credit Merchandise Inventory and then Debit something $4,000 to off-set the Credit. The problem is I have no 'Cost of Goods Sold' account title because this problem doesn't allow it. I do have 'Purchases' and 'Purchase Returns and Allowances' but I do not believe the Debit $4,000 goes into either one.

Anyone here in Financial Accounting or an Accountant themselves?

Here is an example of the journal entry that must be made:

XXXXXXXX..........................................4,000
....Merchandise Inventory...............................4,000

 

[Masquerouge]

Do you have any sort of reevaluation/adjustement account?

 

[Godwynn]

Do you have any sort of reevaluation/adjustement account?

Nay, the adjustments are made directly into the actual accounts. I called up a friend of mine and it seems everyone is stuck on this.

 

[Masquerouge]

Nay, the adjustments are made directly into the actual accounts. I called up a friend of mine and it seems everyone is stuck on this.

Well, besides selling some of your stock or readjusting its value somehow, I don't see what else could fit here Do you have a list of all the accounts you're allowed to use?

 

[ShannonCT]

Do you have a Retained Earnings account?

 

[Godwynn]

Well, besides selling some of your stock or readjusting its value somehow, I don't see what else could fit here Do you have a list of all the accounts you're allowed to use?

Yes. It is quite lengthy. These are all possible accounts that could be used. Some are very unlikely to be it.

Cash
A/Rec
Notes Receivable
Office Supplies
Prepaid Insurance
Equipment
I. Raymond, Drawing
Sales Returns and Allowances
Purchases
Freight-in
Sales Salaries Expense
Office Salaries Expense
Rent Expense

Do you have a Retained Earnings account?

Unfortunately No. I'm starting to think there is something wrong with the problem and not with us students.

 

[warpus]

I smell fraud.

 

[Godwynn]

I smell fraud.

My accounting teacher is a fraud.

 

[Masquerouge]

I don't see a solution. But it might be because I'm not very familiar with US GAAP...

 

[Duke of Marlbrough]

http://ccba.jsu.edu/accounting/PERPETUALPERIODICJE.HTML

Periodic inventory systems keep the inventory balance at the same value that it was at the beginning of the year. At year end, the inventory balance is adjusted to a physical count. To account for inventory purchases in a periodic inventory system, an account called "Purchases" is used rather than debiting "Inventory".


It still looke like COGS may be the best choice, but since it is not an option:
It sounds like it may be 'Purchases' that get's Debited....?

 

[Godwynn]

It sounds like it may be 'Purchases' that get's Debited....?

I'm really hesitant to do that since I didn't purchase anything else. My sister has her accountants at her work trying to figure this out and I'm about to run up to my accountant's office to get this damn problem finished.

 

[Rambuchan]

Have you considered that it may be "Depreciation" from the Equipment schedule and that this may be an exercise in teaching about "book value"?

 

[Godwynn]

Have you considered that it may be "Depreciation" from the Equipment schedule and that this may be an exercise in teaching about "book value"?

It can't be. Merchandise Inventory is different from Equipment, and depreciation has a Credit Balance.

 

[JollyRoger]

Have you consulted Betty Crocker?

 

[Birdjaguar]

From the list of choices I'd go with "Purchases". But this is exactly the kind of question I would ask my accountant to answer for me.

 

[bhsup]

Birdjaguar, you just got Jollyrolled.

 

[Birdjaguar]

Birdjaguar, you just got Jollyrolled.

Well...OK, but what does that mean? And should I infract Godwyn for it?

 

[bhsup]

Well no, I don't think Godwynn would appreciate that, but did you notice the eight years between Godwynn's last post and Jolly's?

 

[Birdjaguar]

No I didn't, but Jolly is now in real trouble; and I mean River City type of trouble.

EDIT: Godwyn never posted the answer; he has had plenty of time.