Homework SourseExercise 82 In your audit of Steve Company you find that a p
Exercise 8-2
In your audit of Steve Company, you find that a physical inventory on December 31, 2017, showed merchandise with a cost of $426,690 was on hand at that date. You also discover the following items were all excluded from the $426,690.
Based on the above information, calculate the amount that should appear on Steve’s balance sheet at December 31, 2017, for inventory.
| 1. | Merchandise of $60,810 which is held by Steve on consignment. The consignor is the Max Suzuki Company. | |
| 2. | Merchandise costing $38,100 which was shipped by Steve f.o.b. destination to a customer on December 31, 2017. The customer was expected to receive the merchandise on January 6, 2018. | |
| 3. | Merchandise costing $47,790 which was shipped by Steve f.o.b. shipping point to a customer on December 29, 2017. The customer was scheduled to receive the merchandise on January 2, 2018. | |
| 4. | Merchandise costing $77,180 shipped by a vendor f.o.b. destination on December 30, 2017, and received by Steve on January 4, 2018. | |
| 5. | Merchandise costing $46,400 shipped by a vendor f.o.b. shipping point on December 31, 2017, and received by Steve on January 5, 2018. |
Solution
The consigned goods of $60,810 are not owned by Steve company and were properly excluded.
The goods in transit to a customer of $47,970 shipped f.o.b. shipping point, are properly excluded from the inventory because the title to the goods passed when they left the seller (Steve)and therefore a sale and related cost of goods sold should be recorded in 2017.
The goods in transit from a vendor of $77,180, shipped f.o.b. destination, are properly excluded from the inventory because the title to the goods does not pass to Steve company until the buyer (Steve) receives them.
| Inventory per physical count | $4,26,690 |
| Goods in transit to customer,f.o.b destination | $38,100 |
| Goods in transit from vendor ,f.o.b seller | $46,400 |
| Inventory yo be reported on balance sheet | $5,11,190 |
