Question

Blossom Company is trying to determine the value of its ending inventory as at February 28, 2017, the company’s year end. The accountant counted everything that was in the warehouse as at February 28, which resulted in an ending inventory valuation of $61,000. However, he was not sure how to treat the following transactions, so he did not include them in inventory.

For each of the below transactions, specify whether the item should be included in ending inventory, and if so, at what amount.

1.		Blossom Company shipped $850 of inventory on consignment to Sunland Company on February 20. By February 28, Sunland Company had sold $360 of this inventory for Blossom.		Include $850Include $490ExcludeInclude $360
2.		On February 28, Blossom was holding merchandise that had been sold to a customer on February 25 but needed some minor alterations. The customer has paid for the goods and will pick them up on March 3 after the alterations are complete. This inventory cost $500 and was sold for $900.		Include $850Include $500Include $900Exclude
3.		In Blossom’s warehouse on February 28 is $380 of inventory that Craft Producers shipped to Blossom on consignment.		Include $380Include $500ExcludeInclude $900
4.		On February 27, Blossom shipped goods costing $930 to a customer and charged the customer $1,320. The goods were shipped FOB destination and the receiving report indicates that the customer received the goods on March 3.		ExcludeInclude $1,320Include $900Include $930
5.		On February 26, Teulon Company shipped goods to Blossom, FOB shipping point. The invoice price was $370 plus $30 for freight. The receiving report indicates that the goods were received by Blossom on March 2.		ExcludeInclude $400Include $30Include $370
6.		Blossom had $640 of inventory put aside in the warehouse. The inventory is for a customer who has asked that the goods be shipped on March 10.		Include $30Include $640ExcludeInclude $400
7.		On February 26, Blossom issued a purchase order to acquire goods costing $765. The goods were shipped FOB destination. The receiving report indicates that Blossom received the goods on March 2.		ExcludeInclude $400Include $765Include $640
8.		On February 26, Blossom shipped goods to a customer, FOB shipping point. The invoice price was $350 plus $21 for freight. The cost of the items was $280. The receiving report indicates that the goods were received by the customer on March 4.

Answer 1

Question 1. Blossom Company shipped $850 of inventory on consignment to Sunland Company on February 20. By February 28, Sunland Company had sold $360 of this inventory for Blossom.

Answer: Here, we will include $490 (850-360) as the consignor i.e. Blossom Company is the owner of the goods and Sunland is an agent.

Question 2. On February 28, Blossom was holding merchandise that had been sold to a customer on February 25 but needed some minor alterations. The customer has paid for the goods and will pick them up on March 3 after the alterations are complete. This inventory cost $500 and was sold for $900.

Answer: Here, the goods are already been sold so we will exclude the cost of goods i.e. $500 from the valuation of inventory.

Question 3 In Blossom’s warehouse on February 28 is $380 of inventory that Craft Producers shipped to Blossom on consignment.

Answer :Here the amount of $380 will be excluded as Blossom is just an agent of the consignment and not the owner.

Question 4 On February 27, Blossom shipped goods costing $930 to a customer and charged the customer $1,320. The goods were shipped FOB destination and the receiving report indicates that the customer received the goods on March 3

Answer: Include $930 as in case of FOB Destination the title of the goods does not pass until the buyer recieves the goods from carrier.

Question 5 On February 26, Teulon Company shipped goods to Blossom, FOB shipping point. The invoice price was $370 plus $30 for freight. The receiving report indicates that the goods were received by Blossom on March 2.

Anwer: $400 will be included in the inventory of Blossom, since in FOB Shipping Point buyer has to bear the cost of freight and they become the owner of the goods when the carrier has possession of goods.

Question 6  Blossom had $640 of inventory put aside in the warehouse. The inventory is for a customer who has asked that the goods be shipped on March 10

Answer: Includee $640 as the sale has not taken place yet and Bloosom still owns the goods.

Question 7

On February 26, Blossom issued a purchase order to acquire goods costing $765. The goods were shipped FOB destination. The receiving report indicates that Blossom received the goods on March 2

Answer: Exclude $765 as under FOB Destination the title doesn't pass to the buyer untill delivery of goods.

Question 8. On February 26, Blossom shipped goods to a customer, FOB shipping point. The invoice price was $350 plus $21 for freight. The cost of the items was $280. The receiving report indicates that the goods were received by the customer on March 4.

Answer: Exclude $280, as the title of goods passes to customer when goods are in transit and the freight charges are also to be borne by buyer.

Therefore the final value of inventory will be= $61,000+$490+$930+$400+$640 = $63,460