Alvarado Company began the current month with inventory costing $16,500, then purchased inventory at a cost of $42,500. The perpetual inventory system indicates that inventory costing $43,210 was sold during the month for $50,000. If an inventory count shows that inventory costing $14,000 is actually on hand at month-end, what amount of shrinkage occurred during the month?

Question

Business

Thomas Wright

13 July, 11:59

Alvarado Company began the current month with inventory costing $16,500, then purchased inventory at a cost of $42,500. The perpetual inventory system indicates that inventory costing $43,210 was sold during the month for $50,000. If an inventory count shows that inventory costing $14,000 is actually on hand at month-end, what amount of shrinkage occurred during the month?

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Answers (2)

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Finley Lucero · Answer 1

=$1,790

Explanation:

The amount of shrinkage is calculated as follows:

The difference between the expected inventory recorded and the actual value.

Expected inventory value =

opening inventory + purchase - cost of goods sold

= 16,500+42,500 - 43,210

=$15790

Actual inventory = $14,000

The amount of shrinkage

= $15,790 - $14,000

=$1,790

Trace Walter · Answer 2

Given:

Inventory costing = $16,500

Purchased inventory = $42,500.

The perpetual inventory system indicates:

Inventory costing = $43,210

Inventory sold = $50,000

Inventory count shows:

Inventory costing (physical inventory count) = $14,000

The physical inventory count is used as an ending inventory balance and is used to calculate the amount of the adjustment needed.

Beginning Inventory + Net Purchases - Cost of Goods Sold = Ending Inventory

Ending inventory = 42,500 + 16,500 - 43,210

= $15790

Shrinkage amount = Ending inventory - physical inventory count

= $15790 - $14000

= $1790