Question

Determining Merchandise to Be Included or Excluded from Ending Inventory

The unadjusted inventory balance of Ultim Corp. is $140,000 on December 31 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 $350 of merchandise inventory set aside for expected shipment to a customer.
b. On December 31, the physical inventory excluded $1,400 of merchandise inventory out on consignment in a customer's showroom.
c. On December 31 , the physical inventory excluded $1,120 of merchandise held on consignment.
d. In-transit merchandise of $1,050 was shipped f.o.b. destination to a customer and was excluded from the physical inventory count. The merchandise was turned over to a common carrier on December 28 and is delivered to the customer on December 31.
e. Ultim Corp. ordered $1,120 of merchandise on December 26. The merchandise was shipped to Ultim Corp. f.o.b. shipping point on December 30 and was expected to arrive January 2 of next year. The merchandise was not included in the physical inventory count.
f. A return to a vendor of merchandise for $1,400 was in transit on December 31 and was excluded from the physical inventory count. The merchandise was shipped f.o.b. shipping point on December 30.
Required Review items a through f and determine the adjusted inventory balance for year-end December 31.

Answer 1

The adjusted inventory balance, review the items provided and make the necessary adjustments to the unadjusted inventory balance. Include items owned by Ultim Corp. and exclude items held on consignment or in transit. Calculate the adjusted inventory balance using the formula: Adjusted Inventory Balance = Unadjusted Inventory Balance + Item a - Item b - Item c + Item d - Item e + Item f.

Step-by-step explanation:

To determine the adjusted inventory balance for year-end December 31, we need to review items a through f and make the necessary adjustments to the unadjusted inventory balance of $140,000.

1. Item a: The $350 of merchandise set aside for expected shipment to a customer should be included in the inventory balance as it is still owned by Ultim Corp.
2. Item b: The $1,400 of merchandise out on consignment should be excluded from the inventory balance as it is not owned by Ultim Corp.
3. Item c: The $1,120 of merchandise held on consignment should be excluded from the inventory balance as it is not owned by Ultim Corp.
4. Item d: The $1,050 of in-transit merchandise, shipped f.o.b. destination, should be included in the inventory balance as it was owned by Ultim Corp. on December 31.
5. Item e: The $1,120 of merchandise ordered on December 26, shipped f.o.b. shipping point, should be excluded from the inventory balance as it was not received by December 31.
6. Item f: The return to a vendor of merchandise for $1,400 should be included in the inventory balance as it was owned by Ultim Corp. on December 31.

Adjusting the inventory balance based on these items:

Adjusted Inventory Balance = Unadjusted Inventory Balance + Item a - Item b - Item c + Item d - Item e + Item f

Answer 2

To determine the adjusted inventory balance for Ultim Corp., we include items a, b, d, and e totaling $3,920 and exclude items c and f totaling $2,520 from the unadjusted balance, resulting in an adjusted balance of $141,400.

Step-by-step explanation:

Determining the adjusted inventory balance for year-end December 31 requires reviewing the items listed and deciding whether they should be included or excluded from ending inventory. Let's consider each item:

• a. $350 of merchandise inventory set aside for expected shipment must be included in inventory as it is still owned by Ultim Corp.
• b. $1,400 of merchandise inventory out on consignment should be included in Ultim Corp.'s inventory since it retains ownership, even when the goods are in a customer’s showroom.
• c. $1,120 of merchandise held on consignment from another company should be excluded, as this inventory belongs to the consignor.
• d. In-transit merchandise of $1,050 shipped f.o.b. destination, which is not yet delivered to the customer, should be included in Ultim Corp.'s inventory as the title passes on delivery.
• e. $1,120 of orders shipped to Ultim Corp. f.o.b. shipping point should be included, as ownership transfers to the buyer when the seller ships the goods.
• f. Returned merchandise of $1,400 in transit shipped f.o.b. shipping point should be excluded, as the title passes to the seller when goods are shipped back.

The unadjusted inventory balance is $140,000. Considering the additions and exclusions, the adjusted inventory balance will be:

Unadjusted inventory balance: $140,000
Add: Inventory to be included (a, b, d, e): $350 + $1,400 + $1,050 + $1,120 = $3,920
Less: Inventory to be excluded (c, f): $1,120 + $1,400 = $2,520
Adjusted inventory balance: $140,000 + $3,920 - $2,520 = $141,400