Question

At December 31, Sunrise Company’s inventory records indicated a balance of $654,000. Upon further investigation it was determined that this amount included the following:
(1) $68,000 of inventory sold and shipped by Sunrise on December 28 under the terms FOB destination, and this inventory was received by the buyer on January 6.
(2) $98,000 of inventory purchased by Sunrise under the terms FOB destination, and this $98,000 of inventory did not arrive until January 2.
(3) $4,000 of inventory held by Sunrise on consignment from another company. (4) $34,000 of inventory consigned to a third-party consignor that it continues to hold at the end of the year.
What is Sunrise's correct ending inventory balance at December 31?
a. $650,000
b. $556,000
c. $728,000
d. $586,000
e. $552,000

Answer 1

Answer:

The answer is: E) $552,000

Explanation:

The inventory balance of Sunrise Company is overstated since it shouldn't include;

• $98,000 of merchandise that will not be received until January 2.
• $4,000 of merchandise from another company held on consignment.

Inventory balance 0 $654,000 - $98,000 - $4,000 = $552,000