Question

Bedrock 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 Bedrock 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. Based on this information, the correct balance for ending inventory on December 31 is:

Answer 1

Answer:

The correct balance for ending inventory is $390,000.

Explanation:

The first point discussing about the consigned goods requires no adjustment as the goods sent on consignment are reported as part of the consignor's inventory until they are sold and these goods are owned by the consignor In our case Bedrock Company is the consignor thus the amount $72000 of consigned goods which is included in Bedrock's inventory of 412000 is correct.

However, the amount of office supplies worth $22000 will be deducted from the ending inventory balance as this is not an inventory that Bedrock is keeping with the intention to resale. The office supplies are for business's own use thus this will be deducted from inventory amount.

The balance of ending inventory will be,

• 412000 - 22000 = $390,000

Answer 2

Answer:

$390,000

Explanation:

This can be determined as follows:

a. The ending inventory balance of $412,000 included $72,000 of consigned inventory for which Bedrock was the consignor.

In accounting, any good in consignment still belongs to the consignor. Therefore, this treatment is correct and it requires not adjustment.

b. 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.

Amount spent on supplies are regarded as petty expenses and it is to be written off as an expenses since supplies are consumables which are not meant for production. This amount should be deducted and the ending inventory balance of $412,000 reported therefore required the following adjustment:

Correct ending inventory balance = $412,000 - $22,000 = $390,000.

Therefore, the correct Bedrock Company December 31 ending inventory balance should be $390,000.