Question

Problem 6-01A al Sheffield Corp. is trying to determine the value of its ending Inventory as of February 28, 2022, the company's year-end. The accountant counted everything that was in the warehouse as of February 28, which resulted in an ending inventory valuation of $54,500. However, she didn't know how to treat the following transactions so she didn't record them (a1) For each of the transactions below, specify whether the item in question should be included in ending inventory, and if so, at what amount. (If item is not Included in the ending Inventory, then enter for the amounts) (a) On February 26, Sheffield shipped to a customer goods costing $690. The goods were shipped FOB shipping point, and the receiving report Indicates that the customer received the goods on March 2 (b) On February 26, Martine Inc. shipped goods to Sheffield FOB destination. The invoice price was $385 plus $15 for freight. The receiving report indicates that the goods were received by Sheffield on March 2 (c) Sheffield had $545 of inventory at a customer's warehouse "on approval." The customer was going to let Sheffield know whether it wanted the merchandise by the end of the week, March 4. (d) Sheffield also had $445 of inventory at a Belle craft shop, on consignment from Sheffield (e) On February 26, Sheffield ordered goods costing $755. The goods were shipped FOB shipping point on February 27. Sheffield received the goods on March 1.

Answer 1

Solution:

a. No. $0 . ( Because, goods has been shipped to customer under FOB shipping point, Sheffield's title over the goods comes to an end as soon as the goods are shipped.)

b. No. $0 ( Here, under FOB destination point, Sheffield gets the title over the goods after it reaches the destination point. i.e. on March 2)

c. Yes. $545 ( Because, under the Approve or reject type sale, title of goods remains in the hands of seller until the final approval of buyer is not received.)

d. Yes. $445 (Goods remained unsold in the hands of consignee sent as consignment, are always belong to consigner (sender of goods).

e. Yes. $755 ( Goods bought under FOB shipping point are belong to the buyer on the date of shipping. i.e. Sheffield has title over it on Feb. 27 )

f. Yes. $275 ( Here, the goods belong to Sheffield unless it dispatched to the buyer under FOB destination type sale ).

g. Yes. $430 ( Fair value of damaged goods is more than its cost, thus it can be included in the ending inventory at cost)