Inventory Management Paper 10

1

Herc Co.’s inventory at December 31, year 2, was $1,500,000 based on a physical count priced at cost, and before any necessary adjustment for the following:
• Merchandise costing $90,000, shipped FOB shipping point from a vendor on December 30, year 2, was received and recorded on January 5, year 3.
• Goods in the shipping area were excluded from inventory although shipment was not made until January 4, year 3. The goods, billed to the customer FOB shipping point on December 30, year 2, had a cost of $120,000.
What amount should Herc report as inventory in its December 31, year 2 balance sheet?






2

Kew Co.’s accounts payable balance at December 31, year 2, was $2,200,000 before considering the following data:
• Goods shipped to Kew FOB shipping point on December 22, year 2, were lost in transit. The invoice cost of $40,000 was not recorded by Kew. On January 7, year 3, Kew filed a $40,000 claim against the common carrier.
• On December 27, year 2, a vendor authorized Kew to return, for full credit, goods shipped and billed at $70,000 on December 3, year 2. The returned goods were shipped by Kew on December 28, year 2. A $70,000 credit memo was received and recorded by Kew on January 5, year 3.
• Goods shipped to Kew FOB destination on December 20, year 2, were received on January 6, year 3. The invoice cost was $50,000.
What amount should Kew report as accounts payable in its December 31, year 2 balance sheet?






3

Lewis Company’s usual sales terms are net sixty days, FOB shipping point. Sales, net of returns and allowances, totaled $2,300,000 for the year ended December 31, year 2, before yearend adjustments. Additional data are as follows:
• On December 27, year 2, Lewis authorized a customer to return, for full credit, goods shipped and billed at $50,000 on December 15, year 2. The returned goods were received by Lewis on January 4, year 3, and a $50,000 credit memo was issued and recorded on the same date.
• Goods with an invoice amount of $80,000 were billed and recorded on January 3, year 3. The goods were shipped on December 30, year 2.
• Goods with an invoice amount of $100,000 were billed and recorded on December 30, year 2. The goods were shipped on January 3, year 3.
Lewis’ adjusted net sales for year 2 should be






4

On January 1, year 2, Dell, Inc. contracted with the city of Little to provide custom built desks for the city schools. The contract made Dell the city’s sole supplier and required Dell to supply no less than 4,000 desks and no more than 5,500 desks per year for two years. In turn, Little agreed to pay a fixed price of $110 per desk. During year 2, Dell produced 5,000 desks for Little. At December 31, year 2, 500 of these desks were segregated from the regular inventory and were accepted and awaiting pickup by Little. Little paid Dell $450,000 during year 2. What amount should Dell recognize as contract revenue in year 2?






5

On October 20, year 2, Grimm Co. consigned forty freezers to Holden Co. for sale at $1,000 each and paid $800 in transportation costs. On December 30, year 2, Holden reported the sale of ten freezers and remitted $8,500. The remittance was net of the agreed 15% commission. What amount should Grimm recognize as consignment sales revenue for year 2?






6

On December 1, year 2, Alt Department Store received 505 sweaters on consignment from Todd. Todd’s cost for the sweaters was $80 each, and they were priced to sell at $100. Alt’s commission on consigned goods is 10%. At December 31, year 2, five sweaters remained. In its December 31, year 2 balance sheet, what amount should Alt report as payable for consigned goods?






7

Southgate Co. paid the in-transit insurance premium for consignment goods shipped to Hendon Co., the consignee. In addition, Southgate advanced part of the commissions that will be due when Hendon sells the goods. Should Southgate include the in-transit insurance premium and the advanced commissions in inventory costs?
Insurance premium
Advanced commissions






8

Jel Co., a consignee, paid the freight costs for goods shipped from Dale Co., a consignor. These freight costs are to be deducted from Jel’s payment to Dale when the consignment goods are sold. Until Jel sells the goods, the freight costs should be included in Jel’s






9

Jel Co., a consignee, paid the freight costs for goods shipped from Dale Co., a consignor. These freight costs are to be deducted from Jel’s payment to Dale when the consignment goods are sold. Until Jel sells the goods, the freight costs should be included in Jel’s






10

Brady Corporation values its inventory at the lower of cost or net realizable value as required by IFRS. Brady has the following information regarding its inventory:
Historical cost $1,000
Estimated selling price 900
Estimated costs to complete and sell 50
Replacement cost 800
What is the amount for inventory that Brady should report on the balance sheet under the lower of cost or net realizable value method?






Result

Total Questions:
Correct Answers:
Wrong Answers:
Percentage: