Question

E8-1 (L02) (Inventoriable Goods and Costs) Presented below is a list of items that may or may not be reported as inventory
in a company’s December 31 balance sheet.

1. Goods out on consignment at another company’s store.
2. Goods sold on an installment basis (bad debts can be reasonably estimated).
3. Goods purchased f.o.b. shipping point that are in transit at December 31.
4. Goods purchased f.o.b. destination that are in transit at December 31.
5. Goods sold to another company, for which our company has signed an agreement to repurchase at a set price that covers all costs related to the inventory.
6. Goods sold where large returns are predictable.
7. Goods sold f.o.b. shipping point that are in transit at December 31.
8. Freight charges on goods purchased.
9. Interest costs incurred for inventories that are routinely manufactured.
10. Costs incurred to advertise goods held for resale.
11. Materials on hand not yet placed into production by a manufacturing firm.
12. Office supplies.
13. Raw materials on which a manufacturing firm has started production but which are not completely processed.
14. Factory supplies.
15. Goods held on consignment from another company.
16. Costs identified with units completed by a manufacturing firm but not yet sold.
17. Goods sold f.o.b. destination that are in transit at December 31.
18. Short-term investments in stocks and bonds that will be resold in the near future.

Instructions:

Indicate which of these items would typically be reported as inventory in the financial statements. If an item should not be
reported as inventory, indicate how it should be reported in the financial statements.

Part - 2

Part - 3

Answer 1

1.	Goods out on consignment at another company’s store.	Inventory	Balance Sheet
2.	Goods sold on an installment basis (bad debts can be reasonably estimated).	Cost of Goods Sold	Income Statement
3.	Goods purchased f.o.b. shipping point that are in transit at December 31.	Inventory	Balance Sheet
4.	Goods purchased f.o.b. destination that are in transit at December 31.	Not Reported	Not Reported
5.	Goods sold to another company, for which our company has signed an agreement to repurchase at a set price that covers all costs related to the inventory.	Inventory	Balance Sheet
6.	Goods sold where large returns are predictable.	Cost of Goods Sold	Income Statement
7.	Goods sold f.o.b. shipping point that are in transit at December 31.	Cost of Goods Sold	Income Statement
8.	Freight charges on goods purchased.	Inventory	Balance Sheet
9.	Interest costs incurred for inventories that are routinely manufactured.	Interest Expense	Income Statement
10.	Costs incurred to advertise goods held for resale.	Advertising Expense	Income Statement
11.	Materials on hand not yet placed into production by a manufacturing firm.	Inventory	Balance Sheet
12.	Office supplies.	Office Supplies	Balance Sheet
13.	Raw materials on which a manufacturing firm has started production but which are not completely processed.	Inventory	Balance Sheet
14.	Factory supplies.	Inventory	Balance Sheet
15.	Goods held on consignment from another company.	Not Reported	Not Reported
16.	Costs identified with units completed by a manufacturing firm but not yet sold.	Inventory	Balance Sheet
17.	Goods sold f.o.b. destination that are in transit at December 31.	Inventory	Balance Sheet
18.	Short-term investments in stocks and bonds that will be resold in the near future.	Short Term Investments	Balance Sheet