Royal Corporation’s inventory at December 31, 2021, was $126,000 (at cost) based on a physical count...

Royal Corporation’s inventory at December 31, 2021, was $126,000 (at cost) based on a physical count of inventory on hand, before any necessary adjustment for the following:

Merchandise costing $16,000, shipped f.o.b. shipping point from a vendor on December 27, 2021, was received by Royal on January 5, 2022.
Merchandise costing $46,000 was shipped to a customer f.o.b. shipping point on December 28, 2021, arrived at the customer’s location on January 6, 2022.
Merchandise costing $22,000 was being held on hand for Jess Company on consignment (i.e., Royal is the consignee).
Estimated sales returns are 20% of annual sales. Sales revenue was $552,000 with a gross profit ratio of 30%.

What amount should Royal Corporation report as inventory in its December 31, 2021, balance sheet?

ultiple Choice

$197,280.
$181,280.
$227,280.
$225,405.

Solutions

Expert Solution

b. $181,280

reason:

inventory on 31st December,2021 =$126,000

less; merchandise held for jess company as a consignment =$22,000

add; sales return (20%of[ 552,000-30%of 552,000]) =$77280

Inventory shown on balance sheet on 31st dec. 2021 =181,280

Note; merchandise costing$16000 is not received till 31st December and date of invoice is not relevant for inventory in hand system.

Merchandise costing $46,000 is not shipped till 31st December that’s why included in the inventory on 31st December.

ekkarill92 answered 1 year ago

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