Questions -
q1. In your audit of Garza Company, you find that a physical inventory on December 31, 2010, showed merchandise with a cost $441,000 was on hand at that date. You also discover the following items were all excluded from the inventory count.
- Merchandise of $61,000, which is held by Garza on consignment. The consignee is the Bontemps Company.
- Merchandise costing $33,000, which was shipped by Garza f.o.b. destination to a customer on December 31, 2010. The customer was expected to receive the merchandise on January 6, 2011.
- Merchandise costing $46,000, which was shipped by Garza f.o.b. shipping point to a customer on December 29, 2010. The customer was schedule to receive the merchandise on January 2, 2011.
- Merchandise costing $73,000 shipped by a vendor f.o.b. destination on December 30, 2010, and received by Garza on January 4, 2011.
- Merchandise costing $51,000 shipped by a vendor f.o.b. shipping point on December 31, 2010, and received by Garza on January 5, 2011.
Based on the above information, calculate the amount that should appear on Garza's balance sheet at December 31, 2010, for inventory.
Q2. Werth Company asks you to review its December 31, 2010 inventory values and prepare the necessary adjustments to the books. The following information is given to you.
- Werth uses the periodic method of recording inventory. A physical count reveals $234,890 of inventory on hand at December 31, 2010.
- Included in inventory is merchandise sold to Bubby 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 $12,800 on December 31. The merchandise cost $7,350, and Bubby received it on January 3.
- Not included in inventory is $8,540 of merchandise purchased from Minsky Industries. This merchandise was received on December 31 after the inventory had been counted. The invoice was received and recorded on December 30.
- Included in inventory was $10,438 of inventory held by Werth on consignment from Jackel Industries.
- Excluded from inventory was a carton labeled "Please accept for credit." This carton contains merchandise costing $1,500, which had been sold to a customer for $2,600. No entry had been made to the books to reflect the return, but none of the returned merchandise seemed damaged.
Determine the proper inventory balance for Werth Company at December 31, 2010.