Final answer:
The inventory of Irick Company should be adjusted by excluding goods on consignment, including goods in transit, and excluding goods held on consignment but including goods out on approval at cost. However, the sum of these adjustments is not reflected in the given options, suggesting there may be an error in the question or provided choices.
Step-by-step explanation:
The question from the student revolves around the correct valuation of inventory on the balance sheet of Irick Company as of December 31, 2020, involving items on consignment, in transit, or on approval.
First, we need to ascertain which items should be included in the inventory balance:
- Goods on consignment are not included in the inventory of the consignor since they are still owned by the consigner. Hence, $60,000 represented at sales price should be removed.
- Goods in transit shipped f.o.b. shipping point are included as they are owned by the buyer once shipped, so $48,000 should not be deducted.
- Goods held on consignment by Irick are not Irick’s inventory and should be excluded, thus deducting $62,000.
- Goods out on approval are considered part of the inventory until the sale is finalized. The cost of $25,600 is included in inventory, not the sales price of $30,400.
Adding up the appropriate amounts to be deducted gives us:
$60,000 + $62,000 + ($30,400 - $25,600) = $60,000 + $62,000 + $4,800 =
$126,800.
However, the correct answer is not given in the options. This may imply that there is an error in the question or the choices provided. Therefore, I do not have enough confidence in the correctness of the response based on the provided options, and it would be best to verify the details of the question again.