Question

In: Accounting

(CO G) In your audit of Garza Company, you find that a physical inventory on December...

(CO G) In your audit of Garza Company, you find that a physical inventory on December 31, 2010, showed merchandise with a cost $541,000 was on hand at that date. You also discover the following items were all excluded from the inventory count.

  • Merchandise of $71,000, which is held by Garza on consignment. The consignee is the Bontemps Company.
  • Merchandise costing $33,000, which was shipped by Garza f.o.b. shipping point to a customer on December 31, 2010. The customer was expected to receive the merchandise on January 6, 2011.
  • Merchandise costing $46,000, which was shipped by Garza f.o.b. destination to a customer on December 29, 2010. The customer was scheduled to receive the merchandise on January 2, 2011.
  • Merchandise costing $73,000 shipped by a vendor f.o.b. shipping point on December 30, 2010, and received by Garza on January 4, 2011.
  • Merchandise costing $51,000 shipped by a vendor f.o.b. destination on December 31, 2010, and received by Garza on January 5, 2011.

Based on the above information, calculate the amount that should appear on Garza’s balance sheet at December 31, 2010, for inventory.

Solutions

Expert Solution

Answer. In your audit of Garza Company, you find that a physical inventory on December 31, 2010, showed merchandise with a cost of $541,000 was on hand at that date. You also discover the following items were all excluded from the $541,000.

1. Merchandise of $71,000 which is held by Garza on consignment. The consignor is the Bontemps Company.

The consignor owns the merchandise, and it was correctly excluded.


2. Merchandise costing $33,000 which was shipped by Garza f.o.b. destination to a customer on December 31, 2010. The customer was expected to receive the merchandise on January 6, 2011.

FOB destination means Garza (the shipper) owns it until it reaches its destination (the buyer). The 33,000 should have been included in inventory.


3. Merchandise costing $46,000 which was shipped by Garza f.o.b. shipping point to a customer on December 29, 2010. The customer was scheduled to receive the merchandise on January 2, 2011.

FOB shipping means that the ownership passes to the customer when the merchandise is picked up by the carrier. So the customer owns the merchandise on December 31 and was correctly excluded from inventory.


4. Merchandise costing $73,000 shipped by a vendor f.o.b. destination on December 30, 2010, and received by Garza on January 4, 2011.

FOB destination means ownership will pass to Garza when it reaches its destination. So on December 31, the merchandise inventory is not owned by Garza and is correctly excluded.


5. Merchandise costing $51,000 shipped by a vendor f.o.b. seller on December 31, 2010, and received by Garza on January 5, 2011.

This should have been included in the inventory because ownership passed to Garza when it was picked up by the carrier for shipment.


Based on the above information, calculate the amount that should appear on Garza's balance sheet at December 31, 2010, for inventory.

541,000 + 33,000 + 51,000 = 525,000

Answer: $525,000

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

In your audit of Newman Company, you find that a physical inventory on December 31, 2019,...
In your audit of Newman Company, you find that a physical inventory on December 31, 2019, showed merchandise with a cost of $399,450 was on hand at that date. You also discover the following items were all excluded from the $399,450. 1. Merchandise costing $52,310 shipped by a vendor f.o.b. shipping point on December 31, 2017, and received by Newman on January 5, 2018. 2. Merchandise costing $75,730 shipped by a vendor f.o.b. destination on December 30, 2017, and received...
In your audit of Chris Anderson Company, you find that a physical inventory on December 31,...
In your audit of Chris Anderson Company, you find that a physical inventory on December 31, 2020, showed merchandise with a cost of $439,750 was on hand at that date. You also discover the following items were all excluded from the $439,750. 1. Merchandise of $63,260 which is held by Anderson on consignment. The consignor is the Max Suzuki Company. 2. Merchandise costing $34,870 which was shipped by Anderson f.o.b. destination to a customer on December 31, 2020. The customer...
Lower-of-Cost-or-Market Inventory Data on the physical inventory of Katus Products Co. as of December 31 follows:...
Lower-of-Cost-or-Market Inventory Data on the physical inventory of Katus Products Co. as of December 31 follows: Inventory Item Inventory Quantity Market Value per Unit (Net Realizable Value) A54 37 $ 56 C77 24 178 F66 30 132 H83 21 545 K12 375 5 Q58 90 18 S36 8 235 V97 140 20 Y88 17 744 Quantity and cost data from the last purchases invoice of the year and the next-to-the-last purchases invoice are summarized as follows: Last Purchases Invoice Next-to-the-Last...
Q3. Explain the importance of observing physical inventory during an audit.
Q3. Explain the importance of observing physical inventory during an audit.
The December 31, 2018, inventory of Tog Company, based on a physical count, was determined to...
The December 31, 2018, inventory of Tog Company, based on a physical count, was determined to be $460,000. Included in that count was a shipment of goods received from a supplier at the end of the month that cost $60,000. The purchase was recorded and paid for in 2019. Another supplier shipment costing $25,000 was correctly recorded as a purchase in 2018. However, the merchandise, shipped FOB shipping point, was not received until 2019 and was incorrectly omitted from the...
The December 31, 2021, inventory of Tog Company, based on a physical count, was determined to...
The December 31, 2021, inventory of Tog Company, based on a physical count, was determined to be $465,000. Included in that count was a shipment of goods received from a supplier at the end of the month that cost $65,000. The purchase was recorded and paid for in 2022. Another supplier shipment costing $27,500 was correctly recorded as a purchase in 2021. However, the merchandise, shipped FOB shipping point, was not received until 2022 and was incorrectly omitted from the...
The December 31, 2018, inventory of Tog Company, based on a physical count, was determined to...
The December 31, 2018, inventory of Tog Company, based on a physical count, was determined to be $461,000. Included in that count was a shipment of goods received from a supplier at the end of the month that cost $61,000. The purchase was recorded and paid for in 2019. Another supplier shipment costing $25,500 was correctly recorded as a purchase in 2018. However, the merchandise, shipped FOB shipping point, was not received until 2019 and was incorrectly omitted from the...
Lower-of-Cost-or-Market Inventory Data on the physical inventory of Ashwood Products Company as of December 31 follows:...
Lower-of-Cost-or-Market Inventory Data on the physical inventory of Ashwood Products Company as of December 31 follows: Description Inventory Quantity Unit Market Price B12 38 $ 57 E41 18 180 G19 33 126 L88 18 550 N94 400 7 P24 90 18 R66 8 250 T33 140 20 Z16 15 752 Quantity and cost data from the last purchases invoice of the year and the next-to-the-last purchases invoice are summarized as follows: Last Purchases Invoice Next-to-the-Last Purchases Invoice Description Quantity Purchased...
Lower-of-Cost-or-Market Inventory Data on the physical inventory of Ashwood Products Company as of December 31 follow:...
Lower-of-Cost-or-Market Inventory Data on the physical inventory of Ashwood Products Company as of December 31 follow: Inventory Item Inventory Quantity Market Value per Unit (Net Realizable Value) B12 38 $ 57 E41 18 180 G19 33 126 L88 18 550 N94 400 7 P24 90 18 R66 8 250 T33 140 20 Z16 15 752 Quantity and cost data from the last purchases invoice of the year and the next-to-the-last purchases invoice are summarized as follows: Last Purchases Invoice Next-to-the-Last...
You are performing an annual audit of a company with a December 31, 20X1 year-end. Your...
You are performing an annual audit of a company with a December 31, 20X1 year-end. Your firm is planning to complete the audit on March 1, 20X2 and release the report on March 31, 20X2. On March 15, 20X2, two material subsequent events occur: • A fire caused extensive damage to the company’s manufacturing plant in New Jersey. • A large customer went bankrupt. At December 31, 20X1, the Company had a receivable of $2,500,000 from this customer; at December...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT