Larkspur, Inc. is trying to determine the value of its ending inventory as of Fe

Question

Larkspur, Inc. is trying to determine the value of its ending inventory as of February 28, 2017, 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 $46,400. However, she didn't know how to treat the following transactions so she didn't record them For each of the transactions below, specify whether the item in question should be included in ending inventory, and if so, at what amount. (If item is not included in the ending inventory, then enter 0 for the amounts. (a) On February 26, Larkspur, Inc. shipped to a customer goods costing $761. 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, Martine Inc. shipped goods to Larkspur, Inc. FOB destination. The invoice price was $349 plus $27 for freight. The receiving report indicates that the goods were received by Larkspur, Inc. on March 2. Larkspur, Inc. had $540 of inventory at a customer's warehouse "on approval." The customer was going to let Larkspur, Inc. know whether it wanted the merchandise by the end of the week, March 4 (c) (d) Larkspur, Inc. also had $379 of inventory at a Belle craft shop, on consignment from Larkspur, Inc.. (e) On February 26, Larkspur, Inc. ordered goods costing $755. The goods were shipped FOB shipping point on February 27. Larkspur, Inc. received the goods on March

Explanation / Answer

Answer a. The title to the goods passed to the customer on Feb 26. 0 Not to be included in inventory. The $761 would have gone to COGS. Answer b. Title passed to Larkspur Inc. only on Mar 2, so as of Feb 28, the goods should not be included in its inventory. 0 Answer c. The goods should be included in Larkspur's inventory - On Feb 28. 540 Answer d. The goods should be included in Larkspur's inventory - On Feb 28. 379 Answer e. Title to the goods passed to Larkspur on Feb 27 (FOB-Shipping Point), Should be included in Larkspur inventory of Feb 28. 755 Answer f. Title to the goods passed to the customer only on Mar 2 (Goods Shipped on FOB Destination), so on Feb 28, they should be included in Larkspur inventory 297 Answer g. Goods are damaged and no longer saleable, they should be valued at Nil Value and not included in inventory. 0

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