Question

Smooth Sailing Company, experienced the following events during 2016:
Purchased $1,800,000 of lumber and other materials for building boats.
Incurred $200,000 for advertising.
Paid $60,000 to have lumber transported to its factory.
Had sales revenue of $6,000,000 during the year.
Incurred $400,000 of general and administrative expenses.
Took a periodic inventory at year-end and determined that material costing $400,000 was on hand. The inventory at the beginning of the year was $200,000.
All costs incurred were added to the appropriate accounts. All sales were on credit.

Required:

Solve for the following items in Smooth Sailing Company's Raw-Material inventory account:

a) Transfers in (TI).
b) Beginning balance (BB).
c) Transfers out (TO).
d) Ending balance (EB).

Answer 1

a) Transfers in (TI) = Cost of inventory purchased + Freight in

= 1,800,000 + 60,000

= $1,860,000

b) Beginning balance (BB) = $200,000

c) Transfers out (TO) = Beginning balance + Transfers in - Ending balance

= 200,000 + 1,860,000 - 400,000

= $1,660,000

d) Ending balance (EB) = $400,000

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