Forever Young Game Stores (FYG) Has Taken a Physical Count

question 49

Essay

Forever Young Game Stores (FYG) has taken a physical count of its inventory at March 31, its fiscal year-end. After reviewing the accounting records and documentation, the following items have been discovered:
(a) An invoice from Shreck Co. indicates that $30,000 of games were shipped to FYG on March 27, terms FOB shipping point. The games and invoice did not arrive at FYG until February 2 and were not included in the physical count.
(b) An invoice from Gamers, Inc. indicates that $8,000 of games were shipped to FYG on March 29, terms FOB destination. The games and invoice did not arrive at FYG until February 2 and were not included in the physical count.
The physical count and cost assignment on March 31 prior to these two items is $440,000. The cost of goods sold for FYG is $2,100,000.
1. Calculate the amount that should be reported as ending inventory for FYG.
2. Calculate the days' sales in inventory before and after the appropriate adjustments for inventory.

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Definitions:

Prepaid Rent

An accounting term for payments made in advance for rent that covers future periods, recorded as an asset on the balance sheet until it is consumed.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded against a fixed asset since it was acquired and put into use.

Unearned Ticket Revenue

Revenue received from tickets sold for future events, which is considered a liability until the service (the event) is provided.

Adjusted Trial Balance

An accounting worksheet that reflects the account balances after adjustments are made for accruals and deferrals at the end of a reporting period.