Question

Mangold Limited is trying to determine he amount o its ending inventory as at February 28, the company's year end. The accountant counted everything n the warehouse in arly March, which resulted n an cnding nventory amount af 202 accountant was not sure how to treat the folowing transactions, so he did not incdude them in the count. He has asknd for your help in determining whather or not the following transactions should be included in inventary 0 Howavor, the 1. Feb 1 Marigold shipped $1,740 of inventary on consignment to Ranff Corporation. By February 28, Banff had sold half of this inventory for Marigold. 19 Marigold was holding merchandise that had been sold to a customer on February 19 but needed adjustments before the customer would take possession. The merchandise cost $970 and alterations cost $130. The customer plans to pick up the merchandise on Mach 2 after the alterations are complete. 22 Mangold shipped goods FOB shipping pont to a customer, The merchandse cost $1,510. The appropriate party paid the treight costs of $9. The receiving report dicates that the goods were received by the customer on March 2 23 Marigold received $1,630 of inventory con consignment from Cralt Producers Ltd. By February 28, Marigold had not sold any of this inventory. 25 Marigold purchased goods FOB shipping point from a supplier. The merchandise cost $1,360. The appropriate party paid the freight costs of $10. The paods were shipped by the supplier on February 26 and received by Marigold on March 3 Mangold purchas d goods F destination rom a supplier, The merchandise cost 1,470 the appropriate party paid the reight costs o $140 Т ods were shipped by the supplier on February 27 and race ed by Mangold on March 4 26 27 Marigold shipped goods FOB destination costing $1,860 to a customer. The appropriate party paid the freight costs of $210. The receiving report indicates that the customer received the goods on March 7. 8. Mar 5 Margold had $1,980 of inventory isolated in the warehouse. The inventory is designated for a customer who has requested that the goods not be shipped until March 5 For each of the situations, specify whether the item should be included in ending inventory, and so, at what amount. For each item that is not included in endng inventory, indicate who owns it and what account, if any, it should have been recorded in, (Round answers to 0 decimal places, e.g. 25.) Amount Ownership Account 1. Feb 1 Marigold shipped $1,740 of inventory on consignment to Danit Corporation. By February 29, Bantt had sold half of this inventory for Marigold. 19 Marigold was holding merchandise that had heen sold to a customer on February 19 but needed alteration before the austomer would take possession. The merchandise cost $970 and aterations cost $130. The customer plans to pick up the merchandise on March 2 after the aterations are complete. 22 Marigold shipped goods FOB shipping point to a customer. The merchandise cost $1,510, The appropriate party paid the freight costs of $9. The receiving report ndicates that the goods were received by the oustomer on March 2. 23 Mangold received $1,630 of inventory on consignment from Craft Producers Ltd. By February 28, Marigold had not sold any of this inventory, 25 Mangold purchased goods FOB shipping point from a supplier. The merchandise cost霈1,360. The approprate party paid the freight oosts of $10. The goods were shipped by the supplier on February 26 and received by Marigold on March 3 26 Manigold purchased goods FOD destination from a supplier. The merchandise cost $1,470. The appropriate party paid the freight costs of $140. The poods were shipped by the suppler on February 27 and received by Marigold on March 4 27 Marigold shipped goods FOB destination costing $1,860 to a customer. The appropriate party paid the freight costs of $210. The receiving report indicates that the customer received the goods on March 7 8. Mar. 5 Marigold had March 5 1,980 of inventory isolated n the warehouse. The inventory is designated for a customer who has requested that the goods not be shipped until

Answer 1

Solution

Marigold Limited

Items to be included or not included in the inventory:

	Date	Description	Include/Do not Include	Amount	Ownership	Account
1	Feb 1,	Marigold shipped $1,740 of inventory on consignment to Bariff Corporation. By February 28, Baniff had sold half of this inventory for Marigold.	Include	$870	Marigold	Inventory
2	Feb 19,	Marigold was holding merchandise that had been sold to a customer on February 19 but needed alteration before the customer would take possession. The merchandise cost $970 and alteration cost $130. The customer plans to pick up the merchandise on March 2 after the alteration is complete.	Do not include	0	Customer	Sales
3	Feb 22,	Marigold shipped goods FOB shipping point to a customer. The merchandise cost $1,510. The appropriate party paid the freight cost of $9. The receiving report indicates that the goods were received by the customer on March 2	Do not include	$1,510	Customer	Sales
4	Feb 23,	Marigold received $1,630 inventory on consignment from Craft Producers Ltd. By February 28, Marigold had not sold any of this inventory	Do not include	$1,630	Craft Producers Ltd	Consignment
5	Feb 25,	Marigold purchased goods FOB shipping point from a supplier. The merchandise cost $1,360. The appropriate party paid the freight $10. The goods were shipped   by the supplier on February 26 and received by Marigold on March 3.	Include	$1,370	Marigold	Inventory
6	Feb 26,	Marigold purchased goods FOB destination from a supplier. The merchandise cost $1,470. The appropriate party paid the freight cost of $140. The goods were shipped by the supplier on February 27 and received by Marigold on March 4.	Do not include	$1,470	Supplier
7	Feb 27,	Marigold shipped goods FOB destination costing $1,860 to a customer. The appropriate party paid the freight costs of $210. The receiving report indicates that the customer received the goods on March 7	Include	$1,860	Marigold	Inventory
8	March 5,	Marigold had $1,980 inventory isolated in the warehouse. The inventory is designated for a customer who has requested that the goods not shipped until March 5	Do not include	$1,980	Customer	Sales

Explanation:

1. Goods shipped on consignment belong to Marigold. Since half of goods sent on consignment are sold, Marigold holds ownership for the remaining half, $1,740/2 = $870.
2. Ownership of goods sold but held for alteration remains with the customer. Hence, do not include $970 in inventory.
3. Ownership of goods shipped FOB shipping point is held by the customer from the date of shipping. Hence, do not include $1,510 in the inventory on February 28.
4. Marigold would be the agent for goods received on consignment and hence the ownership of goods $1,630 received on consignment is Craft Producers Ltd.
5. The ownership of goods shipped on February 26 FOB shipping point $1,360 + freight $10 is held by Marigold. Hence, include $1,370 in inventory.
6. The ownership of goods received on March 4, but purchased on FOB destination is held by the supplier on February 28. Hence, do not include $1,470 in the inventory on February 28.
7. The ownership of goods shipped on FOB destination but received by the customer on March 7 is held by Marigold till the goods are received by the customer. Hence, include $1,860 in inventory. The $210 freight does not include in inventory it’s a freight out expense item.
8. Inventory isolated in the warehouse on the request of the customer does not belong to Marigold. Hence, do not include $1,980.