Question

Which of the following should not be included in the year-end inventory balance of a company?

		Goods the company owns, but has placed on consignment with another company.
		Goods shipped from the company's supplier that were shipped F.O.B. shipping point on December 31, and are now in transit.
		Goods the company shipped to a customer F.O.B. destination that are in transit on December 31.
		All choices should be included.

Entity G uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $500,000. Management estimates that 5% of accounts receivable will be uncollectible. The Allowance for Doubtful Accounts has a credit balance of $4,000 before adjustment. What is the net (cash) realizable value of the accounts receivable immediately after adjustment?

		$475,000
		$500,000
		$496,000
		$471,000

Entity H uses a periodic inventory system. If beginning inventory is $60,000, the cost of goods purchased is $390,000, and ending inventory is $70,000 what is cost of goods sold?

		$380,000
		$520,000
		$400,000
		$320,000

Answer 1

1) Inventory includes Goods on consignment given, Goods sold on FOB destination point all are included in inventory but goods sold on FOB shipping point is not included in Inventory

So answer is b) Goods shipped from the company's supplier that were shipped F.O.B. shipping point on December 31, and are now in transit.

2) Net realizable value = Account receivable-Allowance for doubtful accounts = 500000-(500000*5%) = 475000

So answer is b) $475000

3) Cost of goods sold = 60000+390000-70000 = 380000

So answer is a) $380000