year are 65% for Hardcovers and 75% for Paperbacks. muer 3i, ratios or assuming
ID: 2419418 • Letter: Y
Question
year are 65% for Hardcovers and 75% for Paperbacks. muer 3i, ratios or assuming un the P6-1B Weber Limited is trying to determine the value of its ending inventory at February 28, 2015, the company's year-end. The accountant counted everything that was in the 2015, the company's yearend. The accountant counted everything that was in the warehouse as of February 28, which resulted in an ending inventory valuation of $48,000. However, she didn't know how to treat the following transactions so she didn't record them Phewever he diánt know houw to trat th (a) On February 26, Weber shipped to a customer goods costing $800. The goods were shipped FOB shipping point, and the receiving report indicates that the customer received the goods on March 2 (b) On February 26, Gretel Inc. shipped goods to Weber FOB destination. The invoice price was $350. The receiving report indicates that the goods were received by Weber on March 2. (c) Weber had $500 of inventory at a customer's warehouse "on approval." The customer was going to let Weber know whether it wanted the merchandise by the end of the week, March 4. (d) Weber also had $400 of inventory on consignment at a Roslyn craft shop. (e) On February 26, Weber ordered goods costing $750. The goods were shipped FOB shipping point on February 27. Weber received the goods on March 1.Explanation / Answer
a. Goods should not be included in Weber's inventory, as the goods were shopped FOB shipping point, and therefore, ownership of goods passed to the buyer at the FOB point.
b. Since the goods were shipped by Gretel Inc. FOB destination, and were not received by Weber Ltd. before March 2, they should not be included in February inventory.
c. As the customer is yet to signify his approval as of February 28, the ownership of the goods has not yet passed to the customer, and hence the cost of the goods should be included in the inventory of Weber Ltd. as on that date.
d. Even though the consignee has physical possession of the goods, the consignor owns the goods. Goods sent on consignment therefore should be part of the consignor's inventory. Therefore they should be included in the ending inventory of Weber Ltd. as of February 28.
e. Since the goods were shipped FOB shipping point on February 27, the ownership has passed to Weber on that date, and therefore cost of the goods should be included in the ending inventory of Wber Ltd. as of February 28.
f. Cost of the goods should be included in the ending inventory of Weber Limited. And revenue should not be recognized in February.
g. As the goods are no longer saleable the cost of the goods should be written off inventories by passing the journal entry Debit inventory loss $ 400, Credit Inventory $ 400.
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