Manufacturing Firms include all costs which are traceable to the production of t
ID: 2566378 • Letter: M
Question
Manufacturing Firms include all costs which are traceable to the production of the product in onde of 3 inventory accounts: Raw Materials, Work in Process and Finished Goods. Question II Presented below is a list of items that may or may not be reported as inventory in a company's December 31 balance sheet. Indicate which of these items would typically be reported as inventory in the financial statements. If an item should not be reported as inventory, indicate how it should be reported in the financial statements. Item in Financial Financial Statement Statement 1. Goods out on consignment at another company's store. 2. Goods sold on an installment basis (bad debts can be reasonably estimated). 3. Goods purchased fo.b. shipping point that are in transit at December 31 4. Goods purchased fo.b. destination that are in transit at December 31 5. Goods sold to another company, for which our company has signed an agreement to repurchase at a set price that covers all costs related to the inventory 6. Goods sold where large returns are predictable. 7. Goods sold fo.b. shipping point that are in transit at December 31. 8. Freight charges on goods purchased 9 Interest costs incurred for inventories that are routinely 10. Costs incurred to advertise goods held for resale. 11. Materials on hand not yet placed into production by a manufactured manufacturing firm. 12. Office supplies.Explanation / Answer
Indicate which of these items would typically be reported as inventory in the financial statements. If an item should not be reported as inventory, indicate how it should be reported in the financial statements
Items in financial statement
Financial statement
1
Goods out on consignment at another company's store
Inventory
Balance Sheet
2
Goods sold on an instalment basis (bad debts can be reasonably estimated )
Cost of goods sold
Income statement
3
Goods purchased f.o.b. shipping point that are in transit at December 31.
Inventory
Balance Sheet
4
Goods purchased f.o.b. destination that are in transit at December 31.
Not reported
Not reported
5
Goods sold to another company, for which our company has signed an agreement to repurchase at a set price that covers all costs related to the inventory.
Inventory
Balance Sheet
6
Goods sold where large returns are predictable.
Cost of goods sold
Income statement
7
Goods sold f.o.b. shipping point that are in transit at December 31.
Cost of goods sold
Income statement
8
Freight charges on goods purchased.
Inventory
Balance Sheet
9
Interest costs incurred for inventories that are routinely manufactured.
Interest expense
Income statement
10
Costs incurred to advertise goods held for resale.
Advertising expense
Income statement
11
Materials on hand not yet placed into production by a manufacturing firm.
Inventory
Balance Sheet
12
Office supplies
Office supplies
Balance Sheet
Items in financial statement
Financial statement
1
Goods out on consignment at another company's store
Inventory
Balance Sheet
2
Goods sold on an instalment basis (bad debts can be reasonably estimated )
Cost of goods sold
Income statement
3
Goods purchased f.o.b. shipping point that are in transit at December 31.
Inventory
Balance Sheet
4
Goods purchased f.o.b. destination that are in transit at December 31.
Not reported
Not reported
5
Goods sold to another company, for which our company has signed an agreement to repurchase at a set price that covers all costs related to the inventory.
Inventory
Balance Sheet
6
Goods sold where large returns are predictable.
Cost of goods sold
Income statement
7
Goods sold f.o.b. shipping point that are in transit at December 31.
Cost of goods sold
Income statement
8
Freight charges on goods purchased.
Inventory
Balance Sheet
9
Interest costs incurred for inventories that are routinely manufactured.
Interest expense
Income statement
10
Costs incurred to advertise goods held for resale.
Advertising expense
Income statement
11
Materials on hand not yet placed into production by a manufacturing firm.
Inventory
Balance Sheet
12
Office supplies
Office supplies
Balance Sheet
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