Party Supply Inc. a calender year corporation, took a physical inventory count on November 30,
Year 1 and properly valued its inventory at $4,250,000. Because the company will not perform
another physical inventory count on December 31, Year 1, you have been asked to calculate how
each of the following transactions would affect the inventory balance reported on the December
31, Year 1 balance sheet. Enter the amount in the associated cells.
1. The company purchased inventory costing $1,500,000 during the month of December. The
inventory was entirely paid for in December so that the company could take advantage of a 2%
discount on the purchase. Freight-in on the inventory was $100,000 for the month.
2. The company purchased goods from a Chinese manufacturer. The cost of goods was
$750,000. The goods were shipped FOB shipping point on December 23 and were received at
U.S. customs on January 2, Year 2. The goods were delayed in customs until January 8, Year 2,
when they were finally received by Party Supply.
3. Sales for the month of December were $5,000,000 and the company has an average gross
profit margin of 30%.
4. Party Supply placed goods with a selling price of $300,000 on its shipping dock on December
31, Year 1. The sale and transaction were recorded by the accounting department on December
31. The terms of the sale were FOB shipping point. The shipper did not pick up the goods the
same afternoon because of inclement weather. The goods were picked up on January 2, Year 2.
5. In response to a customer survey, Party Supply decided to start selling goods on consignment
in December Year 1. An initial order of $100,000 (at cost) was delivered from the Party Supply
warehouse to the consignee. The consignee sold 25% of the goods in December, Year 1 and
another 40% in January, Year 2. The remaining inventory was returned by the consignee in
January.
6. Party Supply started to use a public warehouse so that its products would be closer to its
customers locations. $150,000 of the total inventory was held in the public warehouse on
December 31, Year 1. The cost to ship the goods from the main warehouse to the public
warehouse was $20,000. The rent paid on the public warehouse for December Year 1 was
$10,000.
7. Part of the company's inventory on hand at year end is specific to New Year's Eve. The value
of that inventory decreases substantially if it is not sold before year end. Remaining inventory of
these items with an original cost of $50,000 was on hand at December 31, Year 1. In early
January, Year 2, Party Supply sold these items for $10,000 and also paid $6,000 to have the
inventory shipped to the buyer..
Party Supply Inc. a calender year corporation, took a physical inven.pdf
1. Party Supply Inc. a calender year corporation, took a physical inventory count on November 30,
Year 1 and properly valued its inventory at $4,250,000. Because the company will not perform
another physical inventory count on December 31, Year 1, you have been asked to calculate how
each of the following transactions would affect the inventory balance reported on the December
31, Year 1 balance sheet. Enter the amount in the associated cells.
1. The company purchased inventory costing $1,500,000 during the month of December. The
inventory was entirely paid for in December so that the company could take advantage of a 2%
discount on the purchase. Freight-in on the inventory was $100,000 for the month.
2. The company purchased goods from a Chinese manufacturer. The cost of goods was
$750,000. The goods were shipped FOB shipping point on December 23 and were received at
U.S. customs on January 2, Year 2. The goods were delayed in customs until January 8, Year 2,
when they were finally received by Party Supply.
3. Sales for the month of December were $5,000,000 and the company has an average gross
profit margin of 30%.
4. Party Supply placed goods with a selling price of $300,000 on its shipping dock on December
31, Year 1. The sale and transaction were recorded by the accounting department on December
31. The terms of the sale were FOB shipping point. The shipper did not pick up the goods the
same afternoon because of inclement weather. The goods were picked up on January 2, Year 2.
5. In response to a customer survey, Party Supply decided to start selling goods on consignment
in December Year 1. An initial order of $100,000 (at cost) was delivered from the Party Supply
warehouse to the consignee. The consignee sold 25% of the goods in December, Year 1 and
another 40% in January, Year 2. The remaining inventory was returned by the consignee in
January.
6. Party Supply started to use a public warehouse so that its products would be closer to its
customers locations. $150,000 of the total inventory was held in the public warehouse on
December 31, Year 1. The cost to ship the goods from the main warehouse to the public
warehouse was $20,000. The rent paid on the public warehouse for December Year 1 was
$10,000.
7. Part of the company's inventory on hand at year end is specific to New Year's Eve. The value
of that inventory decreases substantially if it is not sold before year end. Remaining inventory of
these items with an original cost of $50,000 was on hand at December 31, Year 1. In early
January, Year 2, Party Supply sold these items for $10,000 and also paid $6,000 to have the
inventory shipped to the buyer.
