Buffalo Company reported a December 31 ending inventory balance of $412,000. The following...
Question:
Buffalo Company reported a December 31 ending inventory balance of $412,000.
The following additional information is also available:
The ending inventory balance of $412,000 did not include goods costing $48,000 that were purchased by Buffalo on December 28 and shipped FOB destination on that date. Buffalo did not receive the goods until January 2 of the following year.
The ending inventory balance of $412,000 included damaged goods at their original cost of $38,000. The net realizable value of the damaged goods was $10,000.
Based on this information, the correct balance for ending inventory on December 31 is:
a) $374,000
b) $384,000
c) $460,000
d) $422,000
e) $438,000
Valuing the Inventory Correctly & Net Realizable Value:
The inventory reported by a company on the balance sheet consists of raw material inventory, work in process inventory and finished goods inventory. If the market value or fair value of the inventory reduces due to some damage or obsolescence, they must be written down to the net realizable value.
Answer and Explanation: 1
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View this answerThe correct balance for ending inventory on December 31 as calculated from the given data is option b) $384,000
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The Effects of Inventory Errors
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Chapter 6 / Lesson 13
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Inventory errors occur when what one believes is in inventory differs from its actual content. The cause of inventory errors can be attributed to simple mistakes, and they lead to either overstated or understated profits. Learn more about the effect that inventory errors can have on businesses.
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