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Chapter 8: Question 4Q (page 421)

Mishima, Inc. indicated in a recent annual report that approximately $19 million of merchandise was received on consignment. Should Mishima, Inc. report this amount on its balance sheet? Explain.

Short Answer

Expert verified

No, Mishima Inc. cannot report the consigned merchandise into its balance sheet as it has no control over it.

Step by step solution

01

Consignment sale

A consignment sale is a type of sale agreement in which the title and ownership of the merchandise remain with the seller (consignor). The consignee only takes responsibility for selling them.

02

Reporting in balance sheet

In the given case, Mishima Inc. is a consignee who has taken the responsibility of selling the goods. But the title and the ownership of merchandise do not belong to Mishima Inc.

Thus Mishima Inc. cannot report merchandise amounting to $19 million on its balance sheet.

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Most popular questions from this chapter

On December 31, 2016, the inventory of Powhattan Company amounts to \(800,000. During 2017, the company decides to use the dollar-value LIFO method of costing inventories. On December 31, 2017, the inventory is \)1,053,000 at December 31, 2017, prices. Using the December 31, 2016, price level of 100 and the December 31, 2017, price level of 108, compute the inventory value at December 31, 2017, under the dollar-value LIFO method.

The net income per books of Linda Patrick Company was determined without knowledge of the errors indicated.

Net Income Error in Ending

Year per Books Inventory

2012 \(50,000 Overstated \) 3,000

2013 52,000 Overstated 9,000

2014 54,000 Understated 11,000

2015 56,000 No error

2016 58,000 Understated 2,000

2017 60,000 Overstated 8,000

Instructions

Prepare a worksheet to show the adjusted net income figure for each of the 6 years after taking into account the inventoryerrors.

Hull Company鈥檚 record of transactions concerning part X for the month of April was as follows.

Purchases Sales

April 1 (balance on hand) 100 @ $5.00 April 5 300

4 400 @ 5.10 12 200

11 300 @ 5.30 27 800

18 200 @ 5.35 28 150

26 600 @ 5.60

30 200 @ 5.80

Instructions

(a) Compute the inventory at April 30 on each of the following bases. Assume that perpetual inventory records are kept inunits only. Carry unit costs to the nearest cent.

(1) First-in, first-out (FIFO).

(2) Last-in, first-out (LIFO).

(3) Average cost.

(b) If the perpetual inventory record is kept in dollars, and costs are computed at the time of each withdrawal, what amountwould be shown as ending inventory in (1), (2), and (3) above? (Carry average unit costs to four decimal places.)

Question:In your audit of Jose Oliva Company, you find that a physical inventory on December 31, 2017, showed merchandise with a cost of \(441,000 was on hand at that date. You also discover the followingitems were all excluded from the \)441,000.

1. Merchandise of \(61,000 which is held by Oliva on consignment. The consignor is the Max Suzuki Company.

2. Merchandise costing \)38,000 which was shipped by Oliva f.o.b. destination to a customer on December 31, 2017. The customerwas expected to receive the merchandise on January 6, 2018.

3. Merchandise costing \(46,000 which was shipped by Oliva f.o.b. shipping point to a customer on December 29, 2017. Thecustomer was scheduled to receive the merchandise on January 2, 2018.

4. Merchandise costing \)83,000 shipped by a vendor f.o.b. destination on December 30, 2017, and received by Oliva on January4, 2018.

5. Merchandise costing $51,000 shipped by a vendor f.o.b. shipping point on December 31, 2017, and received by Oliva onJanuary 5, 2018.

Instructions

Based on the above information, calculate the amount that should appear on Oliva鈥檚 balance sheet at December 31, 2017, for inventory.

Question:Tori Amos Corporation began operations on December 1, 2016. The only inventory transaction in 2016 was the purchase of inventory on December 10, 2016, at a cost of \(20 per unit. None of this inventory was sold in 2016. Relevant information is as follows.

Ending inventory units

December 31, 2016 100

December 31, 2017, by purchase date

December 2, 2017 100

July 20, 2017 50 150

During the year, the following purchases and sales were made.

Purchases Sales

March 15 300 units at \)24 April 10 200

July 20 300 units at 25 August 20 300

September 4 200 units at 28 November 18 150

December 2 100 units at 30 December 12 200

The company uses the periodic inventory method.

Instructions

(a) Determine ending inventory under (1) specific identification, (2) FIFO, (3) LIFO, and (4) average cost.

(b) Determine ending inventory using dollar-value LIFO. Assume that the December 2, 2017, purchase cost is the current cost of inventory. (Hint:The beginning inventory is the base layer priced at $20 per unit.)
See all solutions

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