Question

Wiley PLUS Brief Exercises, DO ITI Exercises, Exercises, Problems, and many additio available for practice in WileyPLUS. Note: All asterisked Questions, Exercises, and Problems relate to material in the appendices to the chapter. Questions 1. "The key to successful business operations is effective inventory Oscar has been paying out all management." Do you agree? Explain. adverse effects may result fro 2. An item must possess two characteristics to be classified as inven 13. Kyle Adams is studyi tory by a merchandiser. What are these two characteristics? examination. What should (3. Your friend Ben Johnson has been hired to help take the physical cost basis of accounting for ventory in Pearson Hardware Store. Explain to Ben what this job realizable value in the low will entail 14. Hendrix Entertainme 4. a Jovad Company ships merchandise to Martin Company on De- sheet date that cost $40 cember 30. The merchandise reaches the buyer on January 6. unit. Under the lower-o Indicate the terms of sale that will result in the goods being in- ing for inventories, whis cluded in (1) Jovad's December 31 inventory, and (2) Martin's the balance sheet? Wh December 31 inventory. 15. Warnke Stores ha Each costs $27. The b. Under what circumstances should Jovad Company include lower-of-cost-or-net consigned goods in its inventory? ries, what value she 5. Topp Hat Shop received a shipment of hats for which it paid the sheet? Why? Wholesaler $2,970. The price of the hats was $3,000 but Topp was 16. Sayaovang C given a $30 cash discount and required to pay freight charges of $50. at December 31 What amount will Topp record for inventory? Why? error have on 6. Explain the difference between the terms FOB shipping point and combined neti FOB destination 17. Dreher 7. Leah Clement believes that the allocation of cost of goods additional dis available for sale should be based on the actual physical flow of Under the goods. Explain to Leah why this may be both impractical and That is, wh: inappropriate. 19. What 8. What is the major advantage and the major disadvantage of the (Hint: Ya dafinuentory costing? statement
  

Can you help me on #s 3, 4, and 5??

Answer 1

3)

Physical inventory count helps in good internal controls of the organisation.

This helps year-end inventory count as per inventory records match with financials value.

This helps as a check to make sure that goods are not being lost or stolen.

4)

(a)

In FOB destination sale contract, all the risks and ownership of the goods are with the seller.

In FOB Shipping point sale contract, all the risks and ownership of the goods are with the buyers once goods are left seller warehouse.

1) In Jovads' Inventory - FOB Destination

2) In Martins' Inventory - FOB Shipping

(b)

Consigned goods are included in consignor inventory until the goods are sold by consignee.

5)

The cost of inventory should include all costs necessary to bring the inventory to the present location and condition.

Any cash discounts or trade discounts should deduct from cost of inventory.

Transportation should be part of inventory as this is the cost to bring the inventory to the present location.

Price of hats	$ 3,000
Less: Cash discount	$     (30)
Net price	$ 2,970
Add: Freight	$        50
Total hats price	$ 3,020