Question

The unadjusted inventory balance of Sara Ann Corp. is $450,000 on December 31, 2020, based on a physical inventory count. The following items must be considered before the inventory valuation is finalized. a. On December 31, the physical inventory excluded $450 of merchandise inventory shipped to Sara Ann Corp. from a vendor f.o.b. shipping point that arrived on January 1, 2021. b. On December 31, the physical inventory excluded $16,200 of merchandise inventory held on consignment by a customer. Sara Ann Corp. is the consignor. c. On December 31, the physical inventory excluded $720 of merchandise held on consignment. The consignor is Sara Ann's largest vendor. d. $16,200 of in-transit merchandise was shipped f.o.b. destination to a customer and was excluded from the physical inventory count. The merchandise was shipped on December 28, 2020, and is expected to arrive at the customer on December 31, 2020. e. Goods are in transit from a vendor to Sara Ann on December 31, 2020. The invoice cost was $10,800 and the goods were shipped f.o.b. shipping point on December 28, 2020. The merchandise was excluded from the physical inventory count because they had not been delivered. f. Merchandise with a cost of $270 is held in the receiving department for return. The merchandise was included from the physical inventory count.

Answer 1

Particulars	$ Value
Physical Inventory Value on Dec 31, 2020	4,50,000
a) FOB Purchase (shipped on Dec 31) (To be included in Dec 31 stock)	450
b) Inventory on consignment (this stock should be accounted for in the books of consignor i.e. sara ann corp)	16,200
c) Inventory recd on consignment basis (it should be excluded as stock does not belong to consignee) (it is excluded which is correct)	-
d) 16200 sales is on FOB which is shipped on Dec 28. It means sales has been recognized and should be excluded from stock (it is excluded which is correct)	-
e) Inventory from Vendor to be shipped on Dec 28 on FOB basis (it should be included as the ownership has been transferred to us i.e. Sara Ann Corp)	10,800
f) Merchandise of 270 held for return (it should be excluded as this does not belong to Sara Ann Corp)	-270
Adjusted Inventory Balance on Dec 31, 2020	4,77,180