Question

1.

The inventory on hand at the end of 2016 for Reddall Company is valued at a cost of $94,000. The following items were not included in this inventory:

1. Purchased goods in transit, under terms FOB shipping point, invoice price $4,000, freight costs $200.
2. Goods out on consignment to Marlman Company, sales price $5,600, shipping costs of $300.
3. Goods sold to Grina Co. under terms FOB destination, invoiced for $1,900 which included $178 freight charges to deliver the goods. Goods are in transit.
4. Goods held on consignment by Reddall at a sales price of $2,700 which included sales commission of 20% of sales price.
5. Purchased goods in transit, shipped FOB destination, invoice price $2,100 which included freight charges of $190.

Required:

Determine the cost of the ending inventory that Reddall should report on its December 31, 2016, balance sheet, assuming that its selling price is 140% of the cost of the inventory.

$_________

2.

Why are the cost of goods sold and ending inventory amounts different for each of the three methods? a. FIFO assumes different physical units are sold than does LIFO which results in different amounts being reported as cost of goods sold. b. FIFO assumes different unit costs are allocated to the cost of goods sold and ending inventory than does LIFO. c. Under FIFO, the cost of inventory includes freight-in, storage and insurance, whereas under LIFO these costs are expensed as incurred. d. Under LIFO, purchase discounts are recorded as part of the cost of inventory when the discount is not taken, resulting in a higher cost of goods sold

Answer 1