FUND.ACCT.PRIN.
25th Edition
ISBN: 9781260247985
Author: Wild
Publisher: RENT MCG
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Textbook Question
Chapter 6, Problem 1QS
Inventory ownership
Homestead Crafts, a distributor of handmade gifts, operates out of owner Emma Finn’s house. At the end of the current period., Emma looks over
her inventory and finds that she has:
- 1,300 units (products) in her basement, 20 of which were damaged by water and cannot be sold.
- 350 units in her van, ready to deliver per a customer order, terms FOB destination.
- 80 units out on consignment to a friend who owns a retail store.
How many units should Emma include in her company’s period-end inventory?
Expert Solution & Answer
To determine
Introduction:
FOB destination:
FOB destination stands for Free On Board destination. It is a term for selling the merchandise, under which the delivery of goods is completed when the goods are reached at buyer's destination. The goods in transit belong to the seller and seller bears the cost of transportation till the buyer's destination. In case of FOB destination, the goods in transit should be included in the seller inventory.
Consignment:
Consignment is a process of selling merchandise, where the seller sends goods to its agent for sale. In this process, the seller is called the consignor and the agent selling the goods on behalf of the seller is called the consignee. The unsold merchandises on consignment are included in the inventory of the consignor and not the consignee.
To Calculate:
The number of units in the period end inventory
Answer to Problem 1QS
Solution:
The number of units in the period end inventory should be 1,710 units
Explanation of Solution
The numbers of units in the period end inventory are calculated as follows:
Note:
- In case of GOF destination terms, the goods in transit belong to the seller, hence 350 units are added in the ending inventory.
- The unsold merchandises on consignment are included in the inventory of the consignor; hence 80 units are added in the ending inventory.
Conclusion
Hence, it can be concluded that the number of units in the period end inventory should be 1,710 units
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Students have asked these similar questions
Muller Computers stores its inventory in a warehouse that burned to the
ground in late November, 2018. Their sales office was at a different location.
In order to file a claim with their insurance, the owners ask you to estimate the
inventory that was in the warehouse. The following information is available:
Beginning inventory
Purchases through November 30
Net sales revenue through November 30
$375,500
470,250
793,000
The company's gross profit has historically been 40% of net sales revenue.
Estimate the value of the inventory destroyed in the fire using the gross profit
method.
a. $388,450
b. $410,000
c. $369,950
d. $528,550
Recording Purchases
Compass Inc. purchased 1,250 bags of insulation from Glassco Corp. The bags of insulation cost $5.50 each. Compass paid Tremblay Trucking $320 to have the bags of insulation shipped to its warehouse. Compass returned 50 bags that were defective and paid for the remainder. Assume that Compass uses the perpetual inventory system and that Glassco did not offer a purchase discount. (Note: You are doing the accounting for Compass Inc.)
Required:
Question Content Area
1. Prepare the journal entry to record the purchase of the bags of insulation.
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- Select -
- Select -
(Purchased inventory on account)
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2. Prepare the entry to record the payment for shipping.
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- Select -
- Select -
(Paid shipping fees)
Question Content Area
3. Prepare the entry for the return of the defective bags.
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- Select -
- Select -
(Returned merchandise)
Question Content Area
4. Prepare the entry to record the payment for the bags kept by…
Muller Computers stores its inventory in a warehouse that burned to the ground in late November, 2018. Their sales office was at a different location. In order to file a claim with their insurance, the owners ask you to estimate the inventory that was in the warehouse. The following information is available:
Beginning Inventory
375,000
Purchases through November 30
470,250
Net sales revenue through november 30
793,000
The company's gross profit has historically been 40% of net sales revenue. Estimate the value of the inventory destroyed in the fire using the gross profit method.
a.$528,550
b.$388,450
c.$369,950
d.$410,000
Chapter 6 Solutions
FUND.ACCT.PRIN.
Ch. 6 - Inventory ownership Homestead Crafts, a...Ch. 6 - QS 6-2 Inventory costs C2
A car dealer acquires a...Ch. 6 - Prob. 3QSCh. 6 - Prob. 4QSCh. 6 - Perpetual: Inventory costing with FIFO P1 A...Ch. 6 - Perpetual: Inventory costing with LIFO Refer to...Ch. 6 - Perpetual Inventory costing with weighted average...Ch. 6 - Periodic: Inventory costing with FIFO P3 Refer to...Ch. 6 - Periodic: Inventory costing with LIFO Refer to the...Ch. 6 - Periodic: Inventory costing with weighted average...
Ch. 6 - Perpetual: Assigning costs with FIFO Trey Monson...Ch. 6 - QS6-11
Perpetual Inventory costing with LIFO
Refer...Ch. 6 - QS 6-12
Perpetual: Inventory costing with weighted...Ch. 6 - QS6.13
Perpetual Inventory costing with specific...Ch. 6 - Periodic: Inventory costing with FIFO P3 Refer to...Ch. 6 - Periodic Inventory costing with LIFO P3 Refer to...Ch. 6 - Periodic: Inventory costing with weighted average...Ch. 6 - Periodic: Inventory costing with specific...Ch. 6 - QS 6-18 Contrasting inventory costing methods...Ch. 6 - Inventory errors A2 In taking a physical inventory...Ch. 6 - Prob. 21QSCh. 6 - Prob. 22QSCh. 6 - Prob. 23QSCh. 6 - Prob. 24QSCh. 6 - Prob. 25QSCh. 6 - Prob. 26QSCh. 6 - Exercise 6-1 Inventory ownership C1
1. At...Ch. 6 - Exercise 6-2
Inventory costs
C2
Walberg...Ch. 6 - Exercise 6-3 Perpetual Inventory costing methods...Ch. 6 - Prob. 4ECh. 6 - Prob. 5ECh. 6 - Exercise 6-5A Periodic: Inventory costing P3 Refer...Ch. 6 - Prob. 7ECh. 6 - Exercise 6-7 Perpetual Inventory costing...Ch. 6 - Exercise 6.8 Specific identification Refer to the...Ch. 6 - Prob. 10ECh. 6 - Prob. 11ECh. 6 - Prob. 12ECh. 6 - Prob. 13ECh. 6 - Prob. 14ECh. 6 - Prob. 15ECh. 6 - Prob. 16ECh. 6 - Prob. 17ECh. 6 - Prob. 18ECh. 6 - Prob. 19ECh. 6 - Prob. 20ECh. 6 - Prob. 21ECh. 6 - Problem 6-1A
Perpetual: Alternative cost...Ch. 6 - Prob. 2PSACh. 6 - Prob. 3PSACh. 6 - Prob. 4PSACh. 6 - Problem 6-5A Lower of cost or market P2 A physical...Ch. 6 - Prob. 6PSACh. 6 - Prob. 7PSACh. 6 - Prob. 8PSACh. 6 - Prob. 9PSACh. 6 - Prob. 10PSACh. 6 - Prob. 1PSBCh. 6 - Prob. 2PSBCh. 6 - Prob. 3PSBCh. 6 - Prob. 4PSBCh. 6 - Prob. 5PSBCh. 6 - Prob. 6PSBCh. 6 - Prob. 7PSBCh. 6 - Prob. 8PSBCh. 6 - Prob. 9PSBCh. 6 - Prob. 10PSBCh. 6 - Prob. 6.1SPCh. 6 - Prob. 6.2SPCh. 6 - AA 6-1 Use Apple's financial statements in...Ch. 6 - AA 6-2 Comparative figures for Apple and Google...Ch. 6 - Prob. 3AACh. 6 - Prob. 1DQCh. 6 - Where is the amount of merchandise inventory...Ch. 6 - If costs are declining, will the LIFO or FIFO...Ch. 6 - Prob. 4DQCh. 6 - Prob. 5DQCh. 6 - Prob. 6DQCh. 6 - Prob. 7DQCh. 6 - Prob. 8DQCh. 6 - BTN 6-3 Golf Challenge Corp. is a retail sports...Ch. 6 - Prob. 2BTNCh. 6 - Prob. 3BTNCh. 6 - Prob. 4BTNCh. 6 - Prob. 5BTN
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