Problem:
Capstone Company uses a periodic inventory system. The company's ending inventory on December 31, 2009, its fiscal-year end, based on a physical count, was determined to be $911,007. Capstone's unadjusted trial balance also showed the following account balances: Purchases, $1,732,590; Accounts payable, $586,845; Accounts receivable, $628,763; Sales revenue, $2,347,380.
The internal audit department discovered the following items:
1. Goods valued at $89,424 held on consignment from Open Seas Inc. were included in the physical count but not recorded as a purchase.
2. Purchases from Golden Sails were incorrectly recorded at $114,575 instead of the correct amount of $39,123. The correct amount was included in ending inventory.
3. Goods that cost $69,863 were shipped from a vendor on December 28, 2009, terms f.o.b. destination. The merchandise arrived on January 3, 2010. The purchase and related accounts payable were recorded in 2009.
4. One inventory item was incorrectly included in ending inventory as 100 units, instead of the correct amount of 1,000 units. This item cost $112 per unit.
5. The 2008 balance sheet reported inventory of $983,664. The internal auditors discovered that a mathematical error caused this inventory to be understated by $173,259. This amount is considered to be material.
6. Goods shipped to a customer f.o.b. destination on December 25, 2009, were received by the customer on January 4, 2010. The sales price was $111,780 and the merchandise cost $61,479. The sale and corresponding accounts receivable were recorded in 2009.
7. Goods shipped from a vendor f.o.b. shipping point on December 27, 2009, were received on January 3, 2010. The merchandise cost $50,301. The purchase was not recorded until 2010.
Required:
1. Determine the correct amounts for 2009 ending inventory, purchases, accounts payable, sales revenue, and accounts receivable.
2. Calculate the cost of goods sold for 2009.
3. Describe the steps Capstone would undertake to correct the error in the 2008 ending inventory.