Valuation of Inventory
The inventory on hand at the end of 2016 for Reddall Company is valued at a cost of $94,000. The following items were not included in this inventory:
Purchased goods in transit, under terms FOB shipping point, invoice price $4,000, freight costs $250.
Goods out on consignment to Marlman Company, sales price $4,200, shipping costs of $300.
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.
Goods held on consignment by Reddall at a sales price of $2,700 which included sales commission of 20% of sales price.
Purchased goods in transit, shipped FOB destination, invoice price $2,100 which included freight charges of $190.
Required:
Determine the cost of the ending inventory that Reddall should report on its December 31, 2016, balance sheet, assuming that its selling price is 140% of the cost of the inventory.
| Computation of ending inventory value as on December 31,2016. | |||||||||
| particulars | Amount($) | ||||||||
| Inventory in Hand (2016) | 94000 | ||||||||
| Add : | |||||||||
| purchase goods in transit ($4000+$250) | 4250 | ||||||||
| Goods out on consignment | 3300 | ||||||||
| (4200/140%)+300 | |||||||||
| Goods sold on FOB Destination | 1230 | ||||||||
| (1900-178)/140% | |||||||||
| Adjusted value of inventory as on December 31,2016 | 102780 | ||||||||
| Note : the goods held on consignment and goods in transit shipped FOB Destination shall not be included in the inventory. | |||||||||
| Therefore , Ending value of inventory on Decmber 31,2016 $ 102780 | |||||||||
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