Question

. Scenario #1: Tarbox Toyota and the Historic Cost of Inventory On December 6, 2019, Tarbox Toyota placed an order to buy twenty-five 2019 Toyota Corollas at a total cost of $439,000 ($17,560 per vehicle) to be delivered by Auto Transport Systems. Tarbox Toyota received the shipment of the twenty-five 2019 Toyota Corollas on December 30, 2019 along with an invoice due in 30 days for $425,000 ($17,000 per vehicle) due to a special discount that Toyota awarded Tarbox because the dealership surpassed its budgeted sales for the year by nearly 25%. • Tarbox Toyota received an invoice for $8,450 from Auto Transport Systems for the delivery of the Corollas on December 30, 2019. . Based on the manufacturer's suggested retail price (MSRP) of $19,600 per vehicle, the shipment had a total sales value of $462,500 AMOUNT To comply with GAAP, Tarbox Toyota would record the cars as inventory on December 30, 2019 at a total historic cost value of: (4 points) Supporting Calculation Required: AMOUNT What was the average historic cost per car recorded by Tarbox Toyota in its inventory on December 30, 2019? (2 points) Supporting Calculation Required:

Answer 1

1	Total Historic cost value of cars as inventory as on Dec 30, 2019, Tar box Toyota would record to compaly with GAAP
		No of units	Cost per Unit	TOTAL COST
			IN $	IN $
	Cost as per order	25	17560	439000
	Less: Special discount allowed by TOYOTA	25	560	14000
	( $ 439000 - $ 425000)
	Net Cost	25	17000	425000
	Delivory charges			8450
	TOTAL LANDED COST	25	17338	433450
	Suggested Retail Price per vehicle			19600
	Total Sales value (given as per the question)			462500
	Total Historic cost value of cars as inventory as on Dec 30, 2019, Tar box Toyota would record to compaly with GAAP			$ 433450
	AVERAGE HISTORIC COST PER CAR RECORDED BY TAR BOX TOYOTA IN ITS INVENTORY AS ON DECEMBER 30, 2019			$ 17338
	NOTES
	1) As per GAAP, Inventory cost includes all sums of applicable charges and expenditure directly or indirectly incurred in bringing the article to its existance condition and location. Hence the cost of delivery is to be added with the purchase cost for valuation.
	2) As per GAAP, Inventory is to be recorded at the lessor of cost or Market value.   Hre market value is higher than cost hence cost value to be recorded
2	Assuming that Tarbox Toyota does not sells any cars received on December 30, 2019 until January 2020 . In the Balance Sheet of December 31,2010 the value of inventory Tarbox Toyota should be recorded is	$ 433450
	Note: Sale of car in the sebsequent period does not effect the method of valuation of inventory in the previous period.    The only exection is the Replacement cost consideration, which does not affect here in the cost of cars
3	Assuming that Tarbox Toyota sold 2 Nos card in December 2019 the the value of inventory is
		Nos	Cost in $	Value in $
	Total No of cars received	25	17338	433450
	Less: cars sold	2	17338	34676
	VALUE OF INVENTORY AS ON DEC 30, 2019 TARBOX TOYOTA TO BE RECORDED	23	17338	398774
	Note: Sale value does not effect the value of inventory since market value is higher than cost
4	COST OF GOODS SOLD EXPENSES VALUE AS ON DECEMBER 31, 2019 TARBOX TOYOTA SHOULD REPORTED IN ITS INCOME STATEMENT			$ 34676
	Note: Cost of goods sold = Materil cost + any other direct expens atributable for making the goods ready for sale
	In the present senario there is no addition cost incurred, hence the landing cost to be recorded as COGS