[shawn in VA]

Hi. the answer is A per the Wiley test bank. Can someone please explain why? Just not understanding it. Thanks!!!

A client’s physical count of inventories was lower than the inventory quantities shown in its perpetual records. This situation could be the result of the failure to record

A Sales.
B Sales returns.
C Purchases.
D Purchase discounts.

[Goingallin]

If sales is not recorded, than inventory balance will remain the same prior to the sale. Inventory was not adjusted bc sales was not recorded.

[mperez102204]

This is my theory behind this question. Since the system used by the company is perpetual (which is continuously updated), you would be able to assume that everything was current at balance sheet date when walking in to completed the count of inventory. Now, when you find out that the inventory count is lower then the records, you be able to cross off sales returns and purchasing, since this would cause the inventory count to be higher then the records. Now, purchase discounts would effect the cost of the inventory, not the count.

I hope this helps. This is how i worked through this question when I saw it in Wiley.

[Author]

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