Question

Gotham Company reported a December 31 ending inventory balance of $412,000. The following additional information is also available:• The ending inventory balance of $412,000 included $72,000 of consigned inventory for which Gotham was the consignor.• The ending inventory balance of $412,000 included $22,000 of office supplies that were stored in the warehouse and were to be used by the company's supervisors and managers during the coming year.• The ending inventory balance of $412,000 did not include goods costing $48,000 that were purchased by Gotham on December 28 and shipped FOB destination on that date. Gotham did not receive the goods until January 2 of the following year.• The ending inventory balance of $412,000 included damaged goods at their original cost of $38,000. The net realizable value of the damaged goods was $10,000.• The ending inventory balance of $412,000 included $43,000 of consigned inventory for which Gotham was the consignee.Based on this information, the correct balance for ending inventory on December 31 is__________.A. $247,000B. $341,000C. $362,000D. $309,000E. $319,000

Answer 1

Answer:

E. $319,000

Explanation:

Begin with an inventory, starting at $412,000.

That data was dealt with properly in the first bullet point, since inventory should also include relegated items in which the consignor is the subject company. Few changes.

In regard to the second point of the bullet, the inventory shouldn't include the office equipment kept for further use. Minus $22,000.

The details throughout the third bullet point was dealt with properly as inventory must not contain items delivered to FOB destination which the buyer has not yet received.

As for the fourth bullet point, unless the net realizable value is significantly below cost, damaged goods should not be included in the inventory at their original cost.

Deduct $28,000 ($38,000-$ 10,000).

In regard to the fifth bullet point, inventory can not include the value of the consigned stock for which the consignor is the subject company.

Deduct $43,000. And inventory finishing should be $412,000-$ 22,000-$ 28,000-$ 43,000 = $319,000.