In: Accounting
Cullumber Company is trying to determine the value of its ending inventory as at February 28, 2017, the company’s year end. The accountant counted everything that was in the warehouse as at February 28, which resulted in an ending inventory valuation of $69,000. However, he was not sure how to treat the following transactions, so he did not include them in inventory.
For each of the below transactions, specify whether the item should be included in ending inventory, and if so, at what amount.
1.Cullumber Company shipped $850 of inventory on consignment to
Oriole Company on February 20. By February 28, Oriole Company had
sold $345 of this inventory for Cullumber.
2. On February 28, Cullumber was holding merchandise that had
been sold to a customer on February 25 but needed some minor
alterations. The customer has paid for the goods and will pick them
up on March 3 after the alterations are complete. This inventory
cost $480 and was sold for $870.
3. In Cullumber’s warehouse on February 28 is $400 of inventory
that Craft Producers shipped to Cullumber on consignment.
4. On February 27, Cullumber shipped goods costing $970 to a
customer and charged the customer $1,320. The goods were shipped
FOB destination and the receiving report indicates that the
customer received the goods on March 3.
5.On February 26, Teulon Company shipped goods to Cullumber, FOB
shipping point. The invoice price was $360 plus $35 for freight.
The receiving report indicates that the goods were received by
Cullumber on March 2.
6.Cullumber had $600 of inventory put aside in the warehouse.
The inventory is for a customer who has asked that the goods be
shipped on March 10.
7.On February 26, Cullumber issued a purchase order to acquire
goods costing $755. The goods were shipped FOB destination. The
receiving report indicates that Cullumber received the goods on
March 2.
8.On February 26, Cullumber shipped goods to a customer, FOB shipping point. The invoice price was $340 plus $26 for freight. The cost of the items was $300. The receiving report indicates that the goods were received by the customer on March 4.
1.Cullumber Company shipped $850 of inventory on consignment to Oriole Company on February 20. By February 28, Oriole Company had sold $345 of this inventory for Cullumber.
Amount which will included in inventory is $850-345= $515. Since this is the value of remaining goods which belongs to Cullumber.
2. On February 28, Cullumber was holding merchandise that had been sold to a customer on February 25 but needed some minor alterations. The customer has paid for the goods and will pick them up on March 3 after the alterations are complete. This inventory cost $480 and was sold for $870.
Since the inventory has been sold to customers and it seems there is no uncertainty that this purchase will be cancelled. This item is not to be included in the inventory.
3. In Cullumber’s warehouse on February 28 is $400 of inventory that Craft Producers shipped to Cullumber on consignment.
The inventory which Cullumber is holding on consignment from Craft belongs to Craft. This item is not to be included in Cullumber’s inventory.
4. On February 27, Cullumber shipped goods costing $970 to a customer and charged the customer $1,320. The goods were shipped FOB destination and the receiving report indicates that the customer received the goods on March 3.
Since as on 28th Feb, the risk of damage of shipped goods remains with Cullumber ( as the goods have been shipped FOB destination) this item is required to be included in Cullumber’s inventory. Amount is $970.
5.On February 26, Teulon Company shipped goods to Cullumber, FOB shipping point. The invoice price was $360 plus $35 for freight. The receiving report indicates that the goods were received by Cullumber on March 2.
Since as on 28th Feb, the risk of damage of shipped goods has been transferred to Cullumber ( as the goods have been shipped by Teulon FOB shipping point) this item is required to be included in Cullumber’s inventory. Amount is $360+$35=$395.
6.Cullumber had $600 of inventory put aside in the warehouse. The inventory is for a customer who has asked that the goods be shipped on March 10.
As on 28th Feb , the risk and ownership of inventory is with Cullumber , hence this item is required to be included. The amount at which this amount is to be included is $600.
7.On February 26, Cullumber issued a purchase order to acquire goods costing $755. The goods were shipped FOB destination. The receiving report indicates that Cullumber received the goods on March 2.
As on 28th Feb , the risk and ownership of inventory is with Seller , hence this item is not required to be included.
8.On February 26, Cullumber shipped goods to a customer, FOB shipping point. The invoice price was $340 plus $26 for freight. The cost of the items was $300. The receiving report indicates that the goods were received by the customer on March 4.
As on 28th Feb , the risk and ownership of inventory is with customer of Cullumber , hence this item is not required to be included.
Thank you.