Question

In: Accounting

Fancy Company is a wholesaler distributor of automotive replacement parts. Initial amounts taken from accounting records...

Fancy Company is a wholesaler distributor of automotive replacement parts. Initial amounts taken from accounting records on December 31, 2016 are as follows: Inventory on December 31, based on physical count, P1,250,000; accounts payable, P1,000,000; sales, P9,000,000.Parts held on consignment from another company to Fancy, the consignee, amounting to P165,000 were included in the physical count on December 31, 2016, and in accounts payable on December 31, 2016.P20,000 of parts which were purchased and paid for in December 2016, were sold in the last week of 22016 and appropriately recorded as sales of P28,000. The parts were included in the physical count on December 31, 2016 because the parts were on the loading dock waiting to be picked up by the customers Parts in transit on December 31, 2016 to customers shipped FOB shipping point on December 28 2016 amounted to P34,000. The customer received the parts on January 6, 2017. Sales of P40,000 to customers for the parts were recorded by Fancy on January 2, 2017Retailers were holding P210,000 at cost and P250,000 at retail of goods on consignment from Fancy Company on December 31, 2016Goods were in transit from a vendor to Fancy Company on December 31, 2016. The cost of goods was P25,000. The goods were shipped FOB shipping point on December 31, 2016.What is the correct amount of inventory?

Solutions

Expert Solution

Step 1

Physical count of inventory means businesses physically count the inventory stock. While valuation of this inventory, following point need to be noted

  • Goods received on consignment are never owned by the company. They are just sold on behalf of another company. Thus they shouldn't be included in inventory
  • Similarly, Goods sent on consignment are still owned by the company. Thus they should be included in the inventory (at cost not retail price)
  • For parts sold on FOB shipping point, ownership is transferred as soon at goods are in transit irrespective of whether received by customer or not. Thus they shouldn't be included in inventory (at cost)
  • Also for goods to be received by vendor on FOB shipping point, ownership transfers as soon as they are in transit. Thus should be included in inventory.

Step 2

Thus, correct value of inventory will be computed as follows

Note : Parts in transit on December 31, 2016 to customers shipped FOB shipping point on December 28 2016 amounting to P34,000 will not be added back to the cost of inventory as they are considered to be sold already as soon as they were in transit.

Step 3

Answer : P1,300,000

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

Kevin Rocks is a wholesale distributor of automotive replacement parts. Initial amounts taken from Kevin Rocks’...
Kevin Rocks is a wholesale distributor of automotive replacement parts. Initial amounts taken from Kevin Rocks’ accounting records are as follows: Inventory on December 31, 2016 (based on physical count of goods in Kevin Rocks warehouse on December 31, 2016) $        1,150,000 Sales in 2016 $        9,000,000 Accounts Payable at December 31, 2016 Vendor Terms Amount Baker Company 2% 10 days, net 10 $ 265,000 Dolly Company Net 30 $210,000 Eager Company Net 30 $300,000 Full Company Net 30 $225,000...
The Hazim Company is a wholesale distributor of automotive replacement parts. For purposes of this question,...
The Hazim Company is a wholesale distributor of automotive replacement parts. For purposes of this question, assume on January 1, year 3, Hazim Co. adopted the dollar-value LIFO method of determining inventory costs for financial and income-tax reporting. The following information relates to this change: Hazim has continued  to use the FIFO method for internal reporting purposes. Hazim's FIFO inventories at December 31, Year 3, Year 4, and Year 5, were $100,000, $137,500, and $195,000, respectively. The FIFO inventory amounts are...
Financial Statements The following amounts were taken from the accounting records of Padget Home Services, Inc.,...
Financial Statements The following amounts were taken from the accounting records of Padget Home Services, Inc., as of December 31, 20Y7. Padget Home Services began its operations on January 1, 20Y7. Cash $ 60,000 Common stock 75,000 Dividends 15,000 Fees earned 620,000 Interest expense 4,800 Land 215,000 Miscellaneous expense 10,200 Notes payable 80,000 Rent expense 70,000 Salaries expense 272,000 Taxes expense 43,000 Utilities expense 85,000 2. Prepare a statement of stockholders’ equity for the year ending December 31, 20Y7. If...
The following cost and inventory data are taken from the accounting records of a Company for...
The following cost and inventory data are taken from the accounting records of a Company for the year just completed: Costs incurred: Direct labor cost ................................................... $140,000 Purchases of raw materials .................................. $236,000 Manufacturing overhead ...................................... $160,000 Advertising expense ............................................. $180,000 Sales salaries ....................................................... $100,000 Depreciation, office equipment ............................ $6,000 Inventories: Beginning the Year End the Year Raw materials ............................ $14,000 $30,000 Work in process .......................... $20,000 $10,000 Finished goods ............................ $40,000 $70,000 Required: 1. Prepare the cost of goods...
The following cost and inventory data are taken from the accounting records of a Company for...
The following cost and inventory data are taken from the accounting records of a Company for the year just completed: Costs incurred: Direct labor cost ................................................... $140,000 Purchases of raw materials .................................. $236,000 Manufacturing overhead ...................................... $160,000 Advertising expense ............................................. $180,000 Sales salaries ....................................................... $100,000 Depreciation, office equipment ............................ $6,000 Inventories: Beginning the Year End the Year Raw materials ............................ $14,000 $30,000 Work in process .......................... $20,000 $10,000 Finished goods ............................ $40,000 $70,000 Required: 1. Prepare the cost of goods...
The following information was taken from the accounting records of JBD Company as of December 31,...
The following information was taken from the accounting records of JBD Company as of December 31, 2020: Inventory ................. $17,000 Accounts Payable .......... $36,000 Common Stock .............. $78,000 Accounts Receivable ....... $11,000 Retained Earnings ......... $24,000 (at January 1, 2020) Copyright ................. $20,000 Salaries Expense .......... $28,000 Supplies .................. $12,000 Mortgage payable .......... $80,000 (due March 1, 2040) Land ...................... $93,000 Notes Payable ............. $17,000 (due November 1, 2022) Trademark ................. $37,000 Sales Revenue ............. $97,000 Equipment ................. $85,000 Income...
The following information was taken from the accounting records of CJTR Company as of December 31,...
The following information was taken from the accounting records of CJTR Company as of December 31, 2020: Accounts Payable .......... ? Accounts Receivable ....... $44,000 Building .................. $68,000 Cash ...................... $17,000 Common Stock .............. $56,000 Cost of Goods Sold ........ $41,000 Dividends ................. ? Equipment ................. $79,000 Interest Revenue .......... $40,000 Inventory ................. $63,000 Land ...................... $82,000 Notes Payable ............. $67,000 Rent Expense .............. $23,000 Retained Earnings ......... ? Salaries Expense .......... $52,000 Salaries Payable .......... $34,000 Sales Revenue ................
The following data from the just completed year are taken from the accounting records of Mason Company:
The following data from the just completed year are taken from the accounting records of Mason Company:Sales $ 659,000Direct labor cost $ 81,000Raw material purchases $ 135,000Selling expenses $ 110,000Administrative expenses $ 50,000Manufacturing overhead applied to work in process $ 208,000Actual manufacturing overhead costs $ 225,0001. Prepare a schedule of cost of goods manufactured. Assume all raw materials used in production were direct materials.2. Prepare a schedule of cost of goods sold. Assume that the company's underapplied or overapplied overhead...
The following selected data were taken from the accounting records of Manitoba Manufacturing Company. The company...
The following selected data were taken from the accounting records of Manitoba Manufacturing Company. The company uses direct-labor hours as its cost driver for overhead costs.   Month Direct-Labor Hours Manufacturing Overhead   January 37,000       $ 753,500   February 36,000       737,000   March 39,000       798,000   April 34,000       698,000   May 41,000       801,000   June 46,000       896,000 June’s costs consisted of machine supplies ($248,400), depreciation ($31,000), and plant maintenance ($616,600). These costs Exhibit the following respective behavior: variable, fixed, and semivariable....
The following information was taken from the accounting records of Dunbar Mifflin Company in 2018. ​​​​​​Beginning...
The following information was taken from the accounting records of Dunbar Mifflin Company in 2018. ​​​​​​Beginning of 2018​Ending of 2018 Direct materials inventory​​​135,000​​83,000 Work-in-process inventory​​​185,000​​154,000 Finished-goods inventory​​​255,000​​216,000 Purchases of direct materials​​​​​​270,000 Direct manufacturing labor​​​​​​225,000 Indirect manufacturing labor​​​​​​103,000 Plant insurance​​​​​​​11,000 Depreciation-plant, building, and equipment​​​​48,000 Plant utilities​​​​​​​​29,500 Repairs and maintenance-plant​​​​​13,500 Equipment leasing costs​​​​​​66,800 Marketing, distribution, and customer-service costs​​​129,500 General and administrative costs​​​​​72,500 Required: 1. Prepare a schedule of cost of goods manufactured. Question 2​​​​​​​​​(Total: 38 marks) Following are the account balances for...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT