Question

OP 8-1 What Should Be Included in Inventory? Identify what items and costs should be included in inventory and cost of goods sold. Howard is trying to compute the inventory balance for the December 31, 2017, financial statements of his automotive parts shop. He has computed a tentative balance of NT$61,800 but suspects that several adjustments still need to be made. In particular, he believes that the following could affect his inventory balance: a. A shipment of goods that cost NT$2,000 was received on December 28, 2017. It was properly recorded as a purchase in 2017 but not counted with the ending inventory. b. Another shipment of goods (FOB destination) was received on January 2, 2018, and cost NT$1,200. It was properly recorded as a purchase in 2018 but was counted with 2017's ending inventory. C. A NT$3,400 shipment of goods to a customer on January 3 was recorded as a sale in 2018 but was not included in the December 31, 2017, ending inventory balance. The goods cost NT$2,300. d. The company had goods costing NT$8,000 on consignment with a customer and NT$6,000 of merchandise was on consignment from a vendor. Neither amount was included in the NT$61,800 figure. e. The following amounts represent merchandise that was in transit on December 31, 2017, and recorded as purchases and sales in 2017 but not included in the December 31 inventory. 1. Ordered by Howard, NT$2,600, FOB destination 2. Ordered by Howard, NT$900, FOB shipping point 3. Sold by Howard, cost NT$3,400, FOB shipping point 4. Sold by Howard, cost NT$5,100, FOB destination Required: 1. Determine the correct amount of ending inventory at December 31, 2017. 2. Assuming net purchases (before any adjustment, if any) totaled NT$79,200 and beginning inventory (January 1, 2017) totaled NT$38,700, determine the cost of goods sold in 2017.

Answer 1

We have to determine the correct amount of ending inventory at Dec 31, 2017 and have to find out the cost of goods sold in 2017. Refer the below images for more detailed solution.

• Determine the correct amount of ending inventory at Dec 31, 2017 : Answer: particulars Amount $ 61800 Add: $ 2000 computation of tentative balance by Howard A Shipment of goods that cost $2000 was received on Dec 28, 2017. It was properly recorded as a purchase in 2017 but not counted with ending inventivy Less Another Shipment of goods was received on Jan 2,208 $(1200) and cost $ 1200. It was properly recorded as a purchase in 2018 but was counted with 2017's ending inventory Add: $ 2300 A$3400 Shipment of goods to a customer on Jan 3 was recorded as a Sale in 2018 but was not included in the Dec 31, 2017, ending Inventory balance the goods costs $2300 $8000 Add: The company had goods costing & 8000 on consignment with a costoner, af 6000 of merchandise was on consignment from a vendor- Neither amount was included in the $ 61.800 figure. alde e (2) Add: e(4) ordered by Howard, $900, FOB shipping point sold by Howard, & 5100, FOB destination Ending Inventory $900 $5100 $78900

3. Assuming net porchases (before any adjustment, if any) totaled $ 79200 and beginning inventory (Jan 1, 2014) totaled $39700 determine the cost of goods Sold in 2017. Answer: Calculation at Adjusted purchases: Amount Net porchases (as given) ( 79200 Less: ordered by Howard, $2600 FOB $(2600) destination (e) (1) Adjusted Net purchases - $ 76600 Particulars & calculation of cost of goods sold in 2014: particulars Amount $38700 $ 76600 Beginning inventory Addi wet purchases cost of goods available for Less Ending inventory cost of goods sold in 2017 sale $ 115300 $ (78900) - & 36400