ACC 124 – Conceptual Framework and Intermediate Accounting 1 – Hand-out 11.
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Topic: Inventory
REV: 1
INVENTORY
Problem 1. Vinz Company included the following items under inventory:
Materials 1,400,000
Advance for materials ordered 200,000
Goods in process 650,000
Unexpired insurance on inventory 60,000
Advertising catalogs and shipping cartons 150,000
Finished goods in factory 2,000,000
Finished goods in entity-owned retail store, 750,000
Including 50% profit on cost
Finished goods in hands of consignees including 40% profit on sales 400,000
Finished goods in transit to customer, shipped FOB destination at cost 250,000
Finished goods out on approval, at cost 100,000
Unsalable finished goods, at cost 50,000
Office Supplies 40,000
Materials in transit, shipped FOB Shipping point, excluding freight of 30,000 330,000
Goods held on consignment, at sales price, cost 150,000 200,000
Requirement: What is the correct amount of Inventory?
Problem 2. Chrissa Company conducted a physical count on December 31,2016 which revealed inventory with a cost
0f 4,410,000.
The following items were excluded from the physical count:
Merchandise held by Chrissa on consignment 610,000
Merchandise shipped by Chrissa FOB Destination to a customer on December 31,2016 380,000
and was received by the customer on January 5,2017
Merchandise shipped by Chrissa FOB Shipping point to a customer on December 31,2016 460,000
and was received by the customer on January 5,2017
Merchandise shipped by a vendor FOB Destination on December 31,2016 was received by 830,000
Chrissa on January 5,2017
Merchandise purchased FOB Shipping point was shipped by the supplier on December 510,000
31,2016 and received by Chrissa on January 5,2017
Requirement: What is the correct amount of inventory on December 31,2016?
Problem 3. Delicate Company is a wholesale distributor of automotive replacement parts. Initial amounts taken
from accounting records on December 31,2016 are as follows:
Inventory on December 31 based on Physical count 1,250,000
Accounts payable 1,000,000
Sales 9,000,000
• Parts held on consignment from another entity to Delicate, the consignee, amounting to 165,000, were
included in the physical count on December 31, 2016, and in accounts payable on December 31,2016.
• 20,000 of parts which were purchased and paid for in December 2016, were sold in the last week of 2016
and appropriately recorded as sales of 28,000. The parts were included in the physical count on December
31, 2016 because the parts were on the loading dock waiting to be picked up by the customer.
• Parts in Transit on December 31, 2016 to customers, shipped FOB Shipping point on December 28, 2016,
amounted to 34,000. The customers received the parts on January 6, 2017. Sales of 40,000 to the customer
for the parts were recorded by Delicate on January 2, 2017.
• Retailers were holding 210,000 at cost and 250,000 at retail, of goods on consignment from Delicate,
at their stores on December 31, 2016.
• Goods were in transit from a vendor to Delicate on December 31, 2016. The cost of goods was 25,000.
The goods were shipped FOB shipping point on December 29, 2016.
Requirements:
1. What is the correct amount of inventory?
2. What is the correct amount of accounts payable?
3. What is the correct amount of sales?
- END OF HAND-OUT -
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Sources:
Intermediate Accounting – Vol. 1 – 2022 Edition – Valix, C., Peralta, J., & Valix, C. A.
Practical Financial Accounting – Vol. 1 – 2018 Edition – Valix, C. & Valix, C. A.
