Exercise NO: 1

Presented below is a list of items that may or may not be reported as inventory in a company’s December 31 balance sheet.\n1. Goods out on consignment

Presented below is a list of items that may or may not be reported as inventory in a company’s December 31 balance sheet.

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1. Goods out on consignment at another company’s store.

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2. Goods sold on an installment basis (bad debts can be reasonably estimated).

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3. Goods purchased f.o.b. shipping point that are in transit at December 31.

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4. Goods purchased f.o.b. destination that are in transit at December 31.

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5. Goods sold to another company, for which our company has signed an agreement to repurchase at

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a set price that covers all costs related to the inventory.

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6. Goods sold where large returns are predictable.

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7. Goods sold f.o.b. shipping point that are in transit at December 31.

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8. Freight charges on goods purchased.

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9. Interest costs incurred for inventories that are routinely manufactured.

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10. Costs incurred to advertise goods held for resale.

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11. Materials on hand not yet placed into production by a manufacturing firm.

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12. Office supplies.

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13. Raw materials on which a manufacturing firm has started production but which are not completely processed.

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14. Factory supplies.

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15. Goods held on consignment from another company.

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16. Costs identified with units completed by a manufacturing firm but not yet sold.

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17. Goods sold f.o.b. destination that are in transit at December 31.

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18. Short-term investments in stocks and bonds that will be resold in the near future.

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Instructions

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Indicate which of these items would typically be reported as inventory in the financial statements. If an item should not be reported as inventory, indicate how it should be reported in the financial statements.

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