In: Accounting
On December 31, 2020, Jen & Mink Clothing (J&M)
performed the inventory count and determined the year-end ending
inventory value to be $75,500. It is now January 8, 2021, and you
have been asked to double-check the year-end inventory listing.
J&M uses a perpetual inventory system. Note: Only relevant
items are shown on the inventory listing.
Jen & Mink Clothing | |||||||||||
Inventory Listing | |||||||||||
December 31, 2020 | |||||||||||
# | Inventory Number | Inventory Description | Quantity (units) | Unit Cost ($) | Total Value ($) | ||||||
1 | 7649 | Blue jackets | 100 | 20 | 2,000 | ||||||
2 | 10824 | Black pants | 300 | 16.67 | 5,000 | ||||||
... | ... | ||||||||||
Total Inventory | $ | 75,500 | |||||||||
The following situations have been brought to your
attention:
Required:
1. In situations (a) to (e) determine whether inventory
should be included or excluded in inventory at December 31, 2020.
If the inventory should be included, determine the correct
inventory cost. (Do not leave any empty spaces; input a 0
wherever it is required.)
2. Determine the correct ending inventory value at
December 31, 2020. Starting with the unadjusted inventory value of
$75,500, add or subtract any errors based on your analysis in Part
1. Assume all items that are not shown in the inventory listing are
recorded correctly.
Next
1 | ||||||
(a) | Under FOB destination,Ownership of goods lies with the seller until it is received by the buyer. | |||||
Here,shipment received on Jan 3,2021 | ||||||
Hence,it should not be included in the inventory of J&M (Buyer). | ||||||
Correct inventory cost=$ 2000 | ||||||
(b) | Under FOB shipping,Ownership of goods lies with the seller until it is shipped to the buyer. | |||||
Here,shipment was on Dec 30,2020. | ||||||
Hence,it should not be included in the inventory of J&M (Seller). | ||||||
Correct treatment has been made by the company and hence no adjustment required | ||||||
(c ) | Under FOB shipping,Ownership of goods lies with the seller until it is shipped to the buyer. | |||||
Here,shipment was on Dec 30,2020. | ||||||
Hence,it should be included in the inventory of J&M (Buyer). | ||||||
Under FOB shipping,shipping charges is the responsibility of the buyer. | ||||||
Correct inventory cost=3300+320+220+60=$ 3900 | ||||||
(d) | Ownsership of consigned goods lies with the consignor (Duke Co.) | |||||
Hence,it should not be included in the inventory of J&M (Consignee). | ||||||
Correct inventory cost=$ 5000 | ||||||
(e) | Under FOB destination,Ownership of goods lies with the seller until it is received by the buyer. | |||||
Here,shipment received on Jan 3,2021 | ||||||
Hence,it should be included in the inventory of J&M (Seller). | ||||||
Correct inventory cost=$ 1000 | ||||||
2 | Correct ending inventory value: | |||||
$ | ||||||
Unadjusted inventory value | 75500 | |||||
(a) | -2000 | |||||
(b) | 0 | |||||
(c ) | 3900 | |||||
(d) | -5000 | |||||
(e) | 1000 | |||||
Correct ending inventory value | 73400 | |||||