Homework Answers
1.
Calculate the value of Sheldon Company's merchandise inventory as follows:
| Goods in transit with shipping terms FOB destination | $1,400 |
| Goods in possession of consignee | $2,500 |
| Net realized value of damaged goods | $900 |
| Total value of merchandise inventory | $4,800 |
2.
Calculate estimated cost of lost inventory as follows:
Cost of lost inventory
= Beginning inventory + Purchases - Cost of goods sold
= Beginning inventory + Purchases - [(Sales - Sales returns) x (1 - Gross profit rate)]
= $23,500 + $12,500 - [($46,000 - $800) x (1 - 0.40)]
= $8,880
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