QUESTION #1 On December 31, 2015, Office Systems Ltd.\'s books showed an ending

Question

QUESTION #1 On December 31, 2015, Office Systems Ltd.'s books showed an ending inventory valuation of $400,000. The accounts for 2015 have been adjusted and closed. Subsequently, the bookkeeper prepared a schedule that showed that the inventory should be $484,500, not $420,000. a) Merchandise in store (at 40% above cost) b) Merchandise purchased, in transit (shipped FOB destination, S420,000 estimated freight, not included, $550), invoice price Merchandise held for later shipment to Davis Electronics at sales price, 40% above cost (already billed to Davis Electronics) Merchandise out on consignment at sales price (cost, $9,000) Merchandise (office equipment) removed from the warehouse and now used in the company's marketing office (at cost) 10,000 14,000 c) d) e) 18,000 15,000 f Merchandise out on approval, sales price -$7,500, cost $3,000 7,500 Income tax rate = 30% Required amount.

Explanation / Answer

A) Calculation of Closing Inventory

Particulars

Particulars

   Amount ($) Merchandise in Store (4,20,000/140%)    3,00,000 Add Merchandise Purchased- Stock in Transit           10,000 Add-Merchandise on Consignment Basis            9,000 Add-Merchandise on Approval Basis            3,000 Closing Inventory         3,22,000

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