Question

As a result of a thorough physical inventory, Horace Company determined that it had inventory worth $320,000 at December 31, 2015. This count did not take into consideration the following facts: Herschel Consignment currently has goods worth $47,000 on its sales floor that belong to Horace but are being sold on consignment by Herschel. The selling price of these goods is $75,000. Horace purchased $22,000 of goods that were shipped on December 27, FOB destination, that will be received by Horace on January 3. Determine the correct amount of inventory that Horace should report.

As a result of a thorough physical inventory, Hora
a. $320,000.
b. $367,000.
c. $387,000.
d. $340,000.

Answer 1

Option (b) is correct.

Step-by-step explanation:

Correct amount of inventory to be reported:

Amount of inventory as per physical verification = $320,000

Cost of goods under consignment to Herschel Corporation = $47,000

Value of inventory to be reported:

= Amount of inventory as per physical verification + Cost of goods under consignment to Herschel Corporation

= $320,000 + $47,000

= $367,000