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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Valuation of Inventory The inventory on hand at the end of 2019 for Reddall Company is valued at a cost of $94,550. The following items were not included in this inventory:

  1. 1. Purchased goods in transit, under terms FOB shipping point, invoice price $4,100, freight costs $220.
  2. 2. Goods out on consignment to Madman Company, sales price $4,200, shipping costs of $250.
  3. 3. Goods sold to Grina Co. under terms FOB destination, invoiced for $1,900 which included $178 freight charges to deliver the goods. Goods are in transit.
  4. 4. Goods held on consignment by Reddall at a sales price of $2,700 which included sales commission of 20% of sales price.
  5. 5. Purchased goods in transit, shipped FOB destination, invoice price $2,100 which included freight charges of $190.

Required:

Determine the cost of the ending inventory that Reddall should report on its December 31, 2019, balance sheet, assuming that its selling price is 140% of the cost of the inventory.

To determine

Compute the cost of the ending inventory to be shown in the balance sheet of Company R.

Explanation

Cost of goods sold:

Cost of goods sold is the total of all the expenses incurred by a company to sell the goods during the given period.

Compute the ending inventory of Company R for the year end:

ParticularsAmount ($)Amount ($)
Ending inventory before adjustments $ 94,550
Add:  
Goods in transit (FOB shipping)$ 4,100  
Freight costs$ 220  
Goods out on consignment (1)$ 3,250  
Good sold to Company G, FOB destination (2)$ 1,230  
Total cost  $ 8,800
Closing balance $ 103,350

Table (1)

The ending inventory at the year-end for Company R is $103,350.

Working note (1):

Compute the goods out on consignment...

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