Carberry Company is trying to determine the value of its ending inventory as at February 28, 2017, the company's year end. The accountant counted everything that was in the warehouse as at February 28, which resulted in an ending inventory valuation of $65,000. However, he was not sure how to treat the following transactions, so he did not include them in inventory:
1. Carberry Company shipped $875 of inventory on consignment to Morden Company on February 20. By February 28, Morden Company had sold $365 of this inventory for Carberry.
2. On February 28, Carberry was holding merchandise that had been sold to a customer on February 25 but needed some minor alterations. The customer has paid for the goods and will pick them up on March 3 after the alterations are complete. This inventory cost $490 and was sold for $880.
3. In Carberry's warehouse on February 28 is $400 of inventory that Craft Producers shipped to Carberry on consignment.
4. On February 27, Carberry shipped goods costing $950 to a customer and charged the customer $1,300. The goods were shipped FOB destination and the receiving report indicates that the customer received the goods on March 3.
5. On February 26, Teulon Company shipped goods to Carberry, FOB shipping point. The invoice price was $375 plus $30 for freight. The receiving report indicates that the goods were received by Carberry on March 2.
6. Carberry had $630 of inventory put aside in the warehouse. The inventory is for a customer who has asked that the goods be shipped on March 10.
7. On February 26, Carberry issued a purchase order to acquire goods costing $750. The goods were shipped FOB destination. The receiving report indicates that Carberry received the goods on March 2.
8. On February 26, Carberry shipped goods to a customer, FOB shipping point. The invoice price was $350 plus $25 for freight. The cost of the items was $280. The receiving report indicates that the goods were received by the customer on March 4.
Instructions
(a) For each of the above transactions, specify whether the item should be included in ending inventory, and if so, at what amount. Explain your reasoning.
(b) What is the revised ending inventory valuation?
Taking It Further
If the accountant of Carberry Company is paid a bonus based on profit, which of these errors might he consider overlooking and not correcting? Explain.