Homestead Crafts, a distributor of handmade gifts, operates out of owner Emma Fi

Question

Homestead Crafts, a distributor of handmade gifts, operates out of owner Emma Finn's house. At the end QUICK STUDY of the current period, Emma looks over her inventory and finds that she has: Qs 5-1 Inventory ownership C1 1,300 units (products) in her basement, 20 of which were damaged by water and cannot be sold. 350 units in her van, ready to deliver per a customer order, terms FOB destination. 80 units out on consignment to a friend who owns a retail store. How many units should Emma include in her company's period-end inventory?

Explanation / Answer

1-----------------------The inventory that is damaged and is now not fit for selling in the market should be expensed off and this will be an expense in the P&L instead of showing this in the balance sheet.

The goods that are out for delivery are also should not be included in the balance sheet as they have left the company warehouse and not in our assets value now.

So the inventory that has to be reported should be only 1280 units (1300 units less 20 damaged units.)

2----------------Since the car price was of FOB only any additional expenses that are incurred to get the Car in should be included in the cost of the inventory.

So the below cost should be included in the inventory price.

Transportation of 250

Insurance cost      300

Import duties       900

Total cost of above expenses is 1450 USD

So the inventory cost should be 1450+14000 FOB price=15450

Advertisement cost and staff salaries are not related with the inventory procurement and hence are not included in the above cost. Such costs are to expensed off in P&L only.

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.