Lara’s Gentle Clothing (LGC) sells gently used women’s clothing. LGC receives used clothing from individuals to display in the shop. LGC receives 40% of the selling price and pays the remaining 60% to the individual who brought the clothing in. LGC takes possession of the clothing; however, payments are made to the individuals who drop off the clothing only once the items are sold. During the year ended December 31, 2020, LGC sold clothing that generated revenue of $100,000 on gross proceeds of $250,000. LGC also had goods priced at $25,000 displayed in the store at December 31, 2020.

Required

a. On December 31, 2020, what is the amount of inventory that should be recorded by LGC?

b. Does the difference between the proceeds of $250,000 and revenue of $100,000 represent COGS or an amount due to consignors? Explain.