Question

The inventory on hand at the end of 2019 for Reddall Company is valued at a cost of $94,000. The following items were not included in this inventory:

1. Purchased goods in transit, under terms FOB shipping point, invoice price $4,200, freight costs $200.
2. Goods out on consignment to Marlman Company, sales price $5,600, shipping costs of $200.
3. Goods sold to Grina Co. under terms FOB destination, invoiced for $1,900 which included $178 freight charges to deliver the goods. Goods are in transit.
4. Goods held on consignment by Reddall at a sales price of $2,700 which included sales commission of 20% of sales price.
5. Purchased goods in transit, shipped FOB destination, invoice price $2,100 which included freight charges of $190.

Required:
Determine the cost of the ending inventory that Reddall should report on its December 31, 2016, balance sheet, assuming that its selling price is 140% of the cost of the inventory.

Answer 1

Answer: $‭103,830‬

Step-by-step explanation:

Ending Inventory = Inventory on hand + Purchased goods shipping point + Goods out on consignment + Goods sold FOB Destination

Selling price of goods is 140% cost of inventory so sales figures will have to be divided by 140% to get the inventory figure.

Purchased goods shipping point

= 4,200 + 200 = $4,400

Goods out on Consignment

= (5,600 / 140%) + 200 = $4,200

Goods sold FOB Destination

= (1,900 - 178) / 140% = $1,230

Ending Inventory

= 94,000 + 4,400 + 4,200 + 1,230

= $‭103,830‬

Goods Purchased FOB Destination are not to be included as they are still the responsibility of the seller. Goods held on consignment should not be included either.