In an annual audit at 31 December 20X8, you find the following transactions near the closing date:

1. Merchandise costing $1822 was received on 3 January 20X9 and the related purchase invoice recorded 5 January. The invoice showed the shipment was made on 29 December 20X8, FOB destination.

2. Merchandise costing $625 was received on 28 December 20X8, and the invoice wasn't recorded. You located it in the hands of the purchasing agent, marked 'on consignment'.

3. A packing case containing products costing $816 was standing in the shipping room when the physical inventory was taken. It was not included in the inventory because it was marked 'Hold for shipping instructions'. Your investigation revealed that the customer's order was dated 18 December 20X8, but that the case was shipped and the customer billed on 10 January 20X9. The product was an inventory item of the client.

4. Merchandise received on 6 January 20X9, costing $720, was entered in the acquisitions journal on 7 January 20X9. The invoice showed shipment was made FOB to the supplier's warehouse on 31 December 20X8. Because it wasn't on hand at 31 December, it wasn't included in inventory. Assume that each of the amounts is material.

REQUIRED

a. State whether the merchandise should be included in the client's inventory.

b. Give your reason for your decision on each item.