Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

5. Inventory

Physical Inventory Count, Ownership of Goods, and Consigned Goods

Financial Accounting

5. Inventory

Physical Inventory Count, Ownership of Goods, and Consigned Goods

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Multiple Choice

How is the amount of merchandise inventory on hand at the end of the fiscal year determined?

By using the balance in the accounts payable ledger.

By conducting a physical count of inventory and adjusting for goods in transit and consigned goods according to ownership.

By recording the amount of inventory purchased during the year.

By estimating inventory based on sales revenue and cost of goods sold.

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Verified step by step guidance

Understand that the amount of merchandise inventory on hand at the end of the fiscal year is determined by accurately assessing the physical inventory and adjusting for specific factors.

Step 1: Conduct a physical count of inventory. This involves manually counting all items in stock to determine the actual quantity of goods available at the end of the fiscal year.

Step 2: Adjust for goods in transit. Determine whether goods in transit are owned by the company based on the shipping terms (FOB shipping point or FOB destination). Include these goods in inventory if ownership has transferred to the company.

Step 3: Account for consigned goods. Identify goods held on consignment and exclude them from inventory if the company does not own them. Conversely, include consigned goods owned by the company but held by third parties.

Step 4: Reconcile the physical count with the accounting records. Compare the physical count results with the inventory balance in the accounting system and make necessary adjustments to ensure accuracy.