All 5 are yes or no eBook Calculator Itens to Be Included in Inventory Required

Question

All 5 are yes or no

eBook Calculator Itens to Be Included in Inventory Required For each situation, state whether Hayes should include the merchandise in its inventory As the auditor of the Hayes Company for the year ended December 31, 2016, you found the following transactions occurred near its closing date: 1. Merchandise received on January 8, 2017, and costing $800 was recorded as inventory on January 8, 2017. An invoice on hand showed the shipment was made FOB shipping point on December 31, 2016. Because the merchandise was not on hand at December 31, 2016, it was not included in the 2016 inventory balance. 2. A product costing $600 was in Hayes's shipping room when the physical inventory was taken. It was not included in the inventory because it was marked "Hold for customer's shipping instructions." Investigation revealed that the customer's order was dated December 18, 2016 but that the case was shipped and the customer billed on January 10, 2017 3. A machine, made to order for a customer, was finished on December 31, 2016, The customer had inspected it and was satisfied with it. The customer was billed in full for $2,000 on that date. The machine was excluded from inventory, although it was shipped on January 2, 2017 4. Merchandise costing $800 was received on December 27, 2016, but a purchase was not recorded. The goods were "on consignment from Miliken Company: 5. Merchandise costing $4,000 was received on January 2, 2017, and the related purchase in ice was recorded on anay 20, n e voce snoei a hes ment vas made on December 29, 2016, FOB destination. Check My Work 1 more Check My Work uses remaining Previous Next

Explanation / Answer

1. Merchandise received on January 8, 2017, and costing $800 was recorded as inventory on January 8, 2017. An invoice on hand showed the shipment was made FOB shipping point on December 31, 2016. Because the merchandise was not on hand at December 31, 2016, it was not ncluded in the 2016 inventory balance.

Answer : Yes, This need to be inclded in Inventory as on December 31, 2016 because it was ordered and shipped before the end of this year. The term FOB stands for “free on board”. If goods are shipped FOB shipping point, transportation costs are paid by the buyer and title passes when the carrier takes possession; thus these goods are part of the buyer’s inventory while in transit.

2. A product Costing $600 was an Hayes's shipping room when the physical inventory was taken. It was not induded in the inventory because it was marked....

Answer: Yes, this need be included in inventory as on December 31, 2016 as Merchandise, except "special orders" should be included in theinventory until shipped.

3. A machine, made to order for a cutomer, was finished on December 31, 2016, The customer had inspected it and was satisfied with it. The customer was billed in full for $2,000 on that date. The machine was excluded from inventory although it was shipped on January 2,2017.

Answer: No, this need not to be included in inventory as on December 31, 2016 as it was ordered, finished inspected, billed on December 31, 2016, just deleivery was pending. Product that is manufactured for a particular customer (special order) is considered sold upon its completion.

4. Merchandise costing $800 was received on December 27, 2016, but a purchase was not recorded. The goods were "on consignment from Milliken Company."

Answer: No, this need not to be included in inventory as on December 31, 2016. Consignment occurs when goods are sent by their owner (the consignor) to an agent (the consignee), who undertakes to sell the goods. The consignor continues to own the goods until they are sold, so the goods appear as inventory in the accounting records of the consignor, not the consignee.

5. Merchandise costing $4,000 was received on January 2, 2017, and the related purchase invoice was recorded on January 5, 2017. The invoice showed that the shipment was made on December 29,2016, FOB destination.

Answer: No, this need not to be included in inventory as on December 31, 2016. The term FOB stands for “free on board”. If goods are shipped FOB destination, transportation costs are paid by the seller and title does not pass until the carrier delivers the goods to the buyer; thus these goods are part of the seller’s inventory while in transit.

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