Items to Be Included in Inventory As the auditor of Hayes Company forthe year ended December 31, 2019, you found the following transactionsoccurred near its closing date: 1. Merchandise received on January 8, 2020, and costing $800 wasrecorded as inventory on January 8, 2020. An invoice on handshowed the shipment was made FOB shipping point on December31, 2019. Because the merchandise was not on hand at December31, 2019, it was not included in the 2019 inventory balance. 2. A product costing $600 was in Hayes's shipping room when thephysical inventory was taken. It was not included in the inventorybecause it was marked "Hold for customer's shipping instructions." Investigation revealed that the customer's order was datedDecember 18, 2019 but that the case was shipped and the customer billed on January 10, 2020.3. A machine, made to order for a customer, was finished onDecember 31, 2019, The customer had inspected it and wassatisfied with it. The customer was billed in full for $2,000 on that date. The machine was excluded from inventory, although it wasshipped on January 2, 2019.4. Merchandise costing $800 was received on December 27, 2019,but a purchase was not recorded. The goods were "on consignment from Milliken Company."5. Merchandise costing $4,000 was received on January 2, 2020, andthe related purchase invoice was recorded on January 5, 2020. Theinvoice showed that the shipment was made on December 29, 2019,FOB destination. Required:For each situation, state whether Hayes should include the merchandisein its inventory. Give your reason for the decision on each item.
Items to Be Included in Inventory As the auditor of Hayes Company for
the year ended December 31, 2019, you found the following transactions
occurred near its closing date:
1. Merchandise received on January 8, 2020, and costing $800 was
recorded as inventory on January 8, 2020. An invoice on hand
showed the shipment was made FOB shipping point on December
31, 2019. Because the merchandise was not on hand at December
31, 2019, it was not included in the 2019 inventory balance.
2. A product costing $600 was in Hayes's shipping room when the
physical inventory was taken. It was not included in the inventory
because it was marked "Hold for customer's shipping instructions." Investigation revealed that the customer's order was dated
December 18, 2019 but that the case was shipped and the customer billed on January 10, 2020.
3. A machine, made to order for a customer, was finished on
December 31, 2019, The customer had inspected it and was
satisfied with it. The customer was billed in full for $2,000 on that date. The machine was excluded from inventory, although it was
shipped on January 2, 2019.
4. Merchandise costing $800 was received on December 27, 2019,
but a purchase was not recorded. The goods were "on consignment from Milliken Company."
5. Merchandise costing $4,000 was received on January 2, 2020, and
the related purchase invoice was recorded on January 5, 2020. The
invoice showed that the shipment was made on December 29, 2019,
FOB destination.
Required:
For each situation, state whether Hayes should include the merchandise
in its inventory. Give your reason for the decision on each item.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
