9. A company has the following information related to its ending inventory: Owned inventory on shelves: $20,000, Goods on consignment from a seller: $50,000, Goods purchased and in transit, FOB shipping point: $10,000, Goods sold and in transit, FOB destination: $6,000, Goods returned from customers: $7,000. Which amount should be included as the final inventory value for this company?
Answer: C
$42,000
To determine the final inventory value for the company, we need to consider only the items that are owned and available for sale. This includes owned inventory, goods on consignment, and goods purchased and in transit, while excluding goods sold and in transit and goods returned.
A) $85,000
Option A is incorrect because it mistakenly includes all values without considering the exclusions. While it sums the owned inventory ($20,000), goods on consignment ($50,000), and goods purchased in transit ($10,000), it does not account for the goods sold and in transit ($6,000) that should not be included in the final inventory value.
B) $35,000
Option B is incorrect as it also fails to account for all applicable inventory items. It does not include the goods on consignment ($50,000) or the goods purchased in transit ($10,000), leading to an underestimation of the inventory value.
C) $42,000
Option C is correct because it accurately calculates the final inventory value by including the owned inventory ($20,000), goods on consignment ($50,000), and goods purchased in transit ($10,000), while excluding the goods sold and in transit ($6,000) and goods returned from customers ($7,000). This results in the correct total of $42,000.
D) $20,000
Option D is incorrect as it only considers the owned inventory ($20,000) and ignores the other significant inventory components such as goods on consignment and goods purchased in transit. Therefore, it significantly undervalues the final inventory.
Conclusion
The final inventory value of $42,000 is derived from the comprehensive inclusion of owned inventory, goods on consignment, and goods in transit, while appropriately excluding items sold and in transit. All other options fail to account for the necessary components of inventory, leading to incorrect total valuations.