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Craig Company asks you to review its December 31, 2014, inventory values and prepare the necessary adjustments to the books. The following information is given to you.1. Craig uses the periodic method of recording inventory. A physical count reveals $307,001 of inventory on hand at December 31, 2014. 2. Not included in the physical count of inventory is $17,540 of merchandise purchased on December 15 from Browser. This merchandise was shipped f.o.b. shipping point on December 29 and arrived in January. The invoice arrived and was recorded on December 31. 3. Included in inventory is merchandise sold to Champy on December 30, f.o.b. destination. This merchandise was shipped after it was counted. The invoice was prepared and recorded as a sale on account for $16,730 on December 31. The merchandise cost $9,606, and Champy received it on January 3. 4. Included in inventory was merchandise received from Dudley on December 31 with an invoice price of $20,428. The merchandise was shipped f.o.b. destination. The invoice, which has not yet arrived, has not been recorded. 5. Not included in inventory is $11,162 of merchandise purchased from Glowser Industries. This merchandise was received on December 31 after the inventory had been counted. The invoice was received and recorded on December 30. 6. Included in inventory was $13,642 of inventory held by Craig on consignment from Jackel Industries. 7. Included in inventory is merchandise sold to Kemp f.o.b. shipping point. This merchandise was shipped after it was counted. The invoice was prepared and recorded as a sale for $24,702 on December 31. The cost of this merchandise was $13,750, and Kemp received the merchandise on January 5. 8. Excluded from inventory was a carton labeled “Please accept for credit.” This carton contains merchandise costing $1,961 which had been sold to a customer for $3,398. No entry had been made to the books to reflect the return, but none of the returned merchandise seemed damaged.
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Explanation / Answer
Determine the proper inventory balance for Craig Company at December 31, 2014.
Inventory balance as on December 31, 2014 = 307001 + 17540 + 11162 - 13642 -13750
Inventory balance as on December 31, 2014 = 308311
Note :
No Treatment :
1) Included in inventory is merchandise sold to Champy on December 30, f.o.b. destination. This merchandise was shipped after it was counted. The invoice was prepared and recorded as a sale on account for $16,730 on December 31. The merchandise cost $9,606, and Champy received it on January 3.
Since It would be included in inventory as inventory is merchandise sold to Champy on f.o.b. destination, Goods is not been transferred till it is not being reached destination
2) Included in inventory was merchandise received from Dudley on December 31 with an invoice price of $20,428. The merchandise was shipped f.o.b. destination. The invoice, which has not yet arrived, has not been recorded.
Since It would be included in inventory as inventory is purchased on f.o.b. destination, Goods has been transferred and would be counted for inventory whether invoice is being issued or not, it does not matter
35) Excluded from inventory was a carton labeled “Please accept for credit.” This carton contains merchandise costing $1,961 which had been sold to a customer for $3,398. No entry had been made to the books to reflect the return, but none of the returned merchandise seemed damaged.
Since it is not being verified therefore it would not be counted as inventory.
Treatment
1) Not included in the physical count of inventory is $17,540 of merchandise purchased on December 15 from Browser. This merchandise was shipped f.o.b. shipping point on December 29 and arrived in January. The invoice arrived and was recorded on December 31.
It would be treated as goods transferred & included in Meerchandise Inventory
2) Not included in inventory is $11,162 of merchandise purchased from Glowser Industries. This merchandise was received on December 31 after the inventory had been counted. The invoice was received and recorded on December 30.
It would be treated as goods transferred & included in Meerchandise Inventory
3) Included in inventory was $13,642 of inventory held by Craig on consignment from Jackel Industries.
It would excluded from inventory as it belongs to inventory of Jackel Industries
4) Included in inventory is merchandise sold to Kemp f.o.b. shipping point. This merchandise was shipped after it was counted. The invoice was prepared and recorded as a sale for $24,702 on December 31. The cost of this merchandise was $13,750, and Kemp received the merchandise on January 5.
It would excluded from inventory as it being sold on FOB-Shipping where shipping is done before 31st and it is being traeted as goods transferred
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