Question

Farley Bains, an auditor with Nolls CPAs, is performing a review of Teal Mountain Ine's Inventory account. Teal Mountain did not have a good year, and top management is under pressure to boost reported income. According to its records, the inventory balance at year-end was $808,200. However, the following information was not considered when determining that amount. Prepare a schedule to determine the correct inventory amount. (Show amounts that reduce Inventory with a negative sign or parenthesis. 45 or parentheses eg. (451) Ending inventory as reported 808200 Included in the company's count were goods with a cost of $224,170 that the company is holding on consignment. The goods belong to Nader Corporation The physical count did not include goods purchased by Teal Mountain with a cost of $38,530 that were shipped FOB shipping point on December 28 and did not arrive at Teal Mountain's warehouse until January 3. Included in the Inventory account was $18,300 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 company received an order on December 29 that was bored and was sitting on the loading dock awaiting pick-up on December 31. The shipper picked up the goods on January 1 and delivered them on January 6. The shipping terms were FOB shipping point. The goods had a selling price of $37 A70 and a cost of $30,000. The goods were not included in the count because they were sitting on the dock

Answer 1

ducunt: 888200 (224170) 38530 €1830) Schedule to determine the correct kreutory Ending Inventory as repossed l Add len Goods on consignment 2 Add Goods pureleased on for shipping point 3 Les Inventories to ausfeered to supplies 4 Add Goods sold on for sleipping point yed not despatched. (5) les provision for Obsolete inventory Cosseet Inventory IN 3050 (46300) 588760

Then should te cordingly deduleded A Explanation 8 © Coods holding on consignment do not constitute the ownership right on those goods, therefore, these show deca not be included in inventory, accordingly a When goods are purchand on for shipping point, the duonership fristes transferred to the buyer at the time goods leave seller's place. In this case the the December 28, therefore goods were shipped on destes has already been tausfered to Teal nounfam , so it should be included in imeutory Since the sale is an for shippieng point and the goods have not been shipped till 318 Dec, accordicgly the risk and ownership has not been passed till 31st Dee, so it should be included in Turentory. As that part of rentory will be used by company's supervises and manager's it self as sup office supplies, therefore that should be trausfered some inveuson to supplies, accordingly debulted frowe mweuthy, as this is the obsolete parts, now theso would not have any resuhe value, therefor there should be deducted from incudory as obsoleceus allowance As the inveutory is valued at cost or market Price whichever is lower.