Aber Limited is trying to determine the value of its ending inventory as of Febr

Question

Aber Limited is trying to determine the value of its ending inventory as of February 28, 2014, the company’s year-end. 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.

For each item that is not included in ending inventory, indicate who owns it and what account, if any, it should have been recorded in.

(a) On February 26, Aber 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, Landis Inc. shipped goods to Aber FOB destination. The invoice price was $350 plus $25 for freight. The receiving report indicates that the goods were received by Aber on March 2. (c) Aber had $500 of inventory at a customer’s warehouse “on approval.” The customer was going to let Aber know whether it wanted the merchandise by the end of the week, March 4. (d) Aber also had $400 of inventory at a Newten craft shop, on consignment from Aber. (e) On February 26, Aber ordered goods costing $750. The goods were shipped FOB shipping point on February 27. Aber received the goods on March 1. (f) On February 28, Aber packaged goods and had them ready for shipping to a customer FOB destination. The invoice price was $350 plus $25 for freight; the cost of the items was $280. The receiving report indicates that the goods were received by the customer on March 2. (g) Aber had damaged goods set aside in the warehouse because they are no longer saleable. These goods originally cost $400 and, originally, Aber expected to sell these items for $600.

Explanation / Answer

Solution.

Clasification of owner and accounts.

Item Owns It Account a Customer Goods in transit b Aber Limited Goods in transit c Aber Limited Inventory d Newten craft shop Inventory e Aber Limited Goods in transit f Aber Limited Inventory g Aber Limited Normal loss

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