Goods were in transit from Como to McGuire on December 31, 1996. The freight bill was not included in the inventory or in accounts payable at December 31, 1996. All of the purchases from James occurred during the last seven days of the year. These items have been recorded in accounts payable and accounted for in the physical inventory at cost before discount. McGuire's policy is to pay invoices in time to take advantage of all cash discounts, adjust inventory accordingly, and record accounts payable, net of cash discounts.
Instructions Prepare a schedule of adjustments to the intial amounts using the format shown below.