Question

The merchandise inventory in Ivanhoe Company was counted after the close of business on December 31, 2021, the company’s year end. It was determined that the total cost of this inventory was $51,200. Ivanhoe wants to know if this is the correct amount that should be reported on the company’s December 31, 2021, balance sheet or if an adjustment needs to be made for any of the following items:

(a)		The count included items costing $1,200 that had been sold but are being held for alterations. The customers have paid in full for these items.
(b)		Ivanhoe Company has $4,450 of merchandise held on consignment for a local designer. These items were included in the inventory count.
(c)		A shipment of inventory costing $2,650 was received on January 2, 2022. It had been shipped by the seller on December 30, FOB shipping point. Freight charges are $350. These items were not included in the inventory count.
(d)		A second shipment of inventory costing $4,700 was received on January 3, 2022. It had been shipped by the seller on December 31, FOB destination. Freight charges are $380. These items were also not included in the inventory count.

Determine the correct amount of Ivanhoe Company’s merchandise inventory at December 31, 2021. (Do not leave any answer field blank. Enter 0 for amounts. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

The correct cost of inventory is:
Total cost per inventory count				$enter a dollar amount
		(a) Inventory held for alterations		enter a dollar amount
		(b) Inventory held on consignment		enter a dollar amount
		(c) Goods shipped FOB shipping point prior to Dec. 31		enter a dollar amount
		Freight on inventory purchase		enter a dollar amount
		(d) Goods shipped FOB destination prior to Dec. 31		enter a dollar amount
		Freight on inventory purchase		enter a dollar amount
Correct inventory cost at December 31				$enter a total amount

Answer 1

Basis	Add / Less	Explanantion for the treatment	Amount in $
As per Verification:	-	-	51200
a) Inventory held for Alterations:	Less	Same is to be reduced , because item is already sold, risk and title is transferred, only minor alterations doesn't cause to count in inventories, but sam eis required to be counted under unpacked items. Hence to be reduced from total cost of inventory.	-1200
b) Inventory held on consignment basis	No Treatment	Same should not be in cluded in the inventory as, here as per the scenario Ivanhoe is consignee who simply held the merchandise for further sale to the local designer. Such merchandise will always be part of Consignor inventory and not consignee.	0
c) Goods Shipped FOB Shipping Point prior to Balance Sheet Date	Add	Same is added because in FOB shipping point , title of goods transferred once it leaves the warehouse of the Seller. Buyer is responsible for the charges	2650
d) Goods Shipped FOB Destination Point prior to Balance Sheet Date	No Treatment	Same is not to be added in Inventory because in FOB destination , goods should be marked as merchandise once it receives at the dock of the buyer, till that time title are with the seller itself.	0
Closing Value of Inventory		52650