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Homework Chapter 6

Anatolia Designs is assessing its ending inventory for February 28, 2020, and must adjust its initial valuation of 48,000 based on several transactions involving ownership transfer of goods. Specific transactions include excluding goods shipped to customers before year-end, including goods on consignment and those ordered before year-end, and accounting for damaged goods as a loss. Additionally, the document discusses the periodic and perpetual inventory systems and provides a balance sheet reflecting inventory at cost and adjustments for lower cost or net realizable value.

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44 views6 pages

Homework Chapter 6

Anatolia Designs is assessing its ending inventory for February 28, 2020, and must adjust its initial valuation of 48,000 based on several transactions involving ownership transfer of goods. Specific transactions include excluding goods shipped to customers before year-end, including goods on consignment and those ordered before year-end, and accounting for damaged goods as a loss. Additionally, the document discusses the periodic and perpetual inventory systems and provides a balance sheet reflecting inventory at cost and adjustments for lower cost or net realizable value.

Uploaded by

k61.2211570003
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

Homework Chapter 6

P6.1
Anatolia Designs is trying to determine the value of its ending inventory at February 28, 2020,
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.

a. On February 26, Anatolia 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. -> not include in Anatolia inventory because ownership
of the goods is passed to buyer on Feb 26.

b. On February 26, Shira Inc. shipped goods to Anatolia, FOB destination. The invoice price was
350. The receiving report indicates that the goods were received by Anatolia on March
2. -> not include in Anatolia inventory of Feb because ownership of the
goods is Shira until March 2.

c. Anatolia had 620 of inventory at a customer’s warehouse “on approval.” The customer was
going to let Anatolia know whether it wanted the merchandise by the end of the week,
March 4. -> include in Anatolia inventory for 620

d. Anatolia also had 400 of inventory on consignment at a Palletine craft shop. -> include in
Anatolia inventory for 400

e. On February 26, Anatolia ordered goods costing 780. The goods were shipped FOB shipping
point on February 27. Anatolia received the goods on March 1. -> include in
Anatolia inventory for 780 because ownership of the goods is passed to
Anatolia on Feb 27.

f. On February 28, Anatolia packaged goods and had them ready for shipping to a customer FOB
destination. The invoice price was 350; the cost of the items was 220. The receiving
report indicates that the goods were received by the customer on March 2. -> include
in Anatolia inventory for 220 because ownership of the goods is
passed to buyer on March 2.

g. Anatolia had damaged goods set aside in the warehouse because they are no longer saleable.
These goods cost 400 and Anatolia originally expected to sell these items for 600. ->
not include in Anatolia inventory and record as a loss of 400.

P6.5 Periodic inventory system


P6.8 Perpetual inventory system
E6.8 Lower cost or NRV

Inventory in balance sheet = 5,138,000

Difference in Total cost and Total lower cost-or-NRV = 232,000


Total cost:
Dr Inventory
Cr Cash/Account payable
Journal entry:
Dr COGS 232,000
Cr Allowance for inventory reduce to LC or NRV 232,000
“Allowance for inventory reduce to LC or NRV” is contra asset account, is contra for Inventory

Balance sheet

Inventory at cost (5,370,000)


Less: Allowance for inventory reduce 232,000
Lower cost to NRV 5,138,000

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