Question

kari downs, an auditor with wheeler cpas, is performing a review of crane companys inventory account. crane did not have a good year, and top management is under pressure to boost reported income. according to its records, the inventory balance at year - end was $730,000. however, the following information was not considered when determining that amount. (a1) prepare a schedule to determine the correct inventory amount. (if an amount reduces the account balance then enter with a negative sign preceding the number, e.g. - 15,000, or parenthesis e.g. (15,000). enter 0 if there is no effect.) ending inventory - as reported $ 1. included in the companys count were goods with a cost of $240,000 that the company is holding on consignment. the goods belong to kroeger corporation. 2. the physical count did not include goods purchased by crane with a cost of $30,000 that were shipped fob destination on december 28 and did not arrive at crane warehouse until january 3. 3. included in the inventory account was $4,000 of office supplies that were stored in the warehouse and were to be used by the companys supervisors and managers during the coming year. 4. the company received an order on december 29 that was boxed and sitting on the loading dock awaiting pick - up on december 31. the shipper picked up the goods on january 1 and delivered them on january 6. the shipping terms were fob shipping point. the goods had a selling price of $30,000 and a cost of $18,000. the goods were not included in the count because they were sitting on the dock.

Explanation:

Step1: Start with reported inventory

$\$730,000$

Step2: Remove consigned goods (not Crane's)

$\$730,000 - \$240,000 = \$490,000$

Step3: No adjustment for FOB destination goods

$\$490,000 + \$0 = \$490,000$

Step4: Remove non-inventory office supplies

$\$490,000 - \$4,000 = \$486,000$

Step5: Add FOB shipping point goods (owned by Crane)

$\$486,000 + \$18,000 = \$504,000$

Answer:

Description	Amount
1. Consigned goods adjustment	$-\$240,000$
2. FOB destination goods adjustment	$\$0$
3. Office supplies adjustment	$-\$4,000$
4. FOB shipping point goods adjustment	$\$18,000$
Correct ending inventory amount	$\boldsymbol{\$504,000}$