Workman Art Sales Uses the Perpetual Inventory System

Essay

Workman Art Sales uses the perpetual inventory system. On September 30, 2014, the company's year end, a physical count was taken of the inventory on hand. The cost of the inventory on hand was determined to be $325,400. However, the accountant has questions about the following items:
1. On the store shelves, the staff counted 7 paintings held by Workman on consignment from a local artist. The paintings are included on the inventory count at a cost of $4,200.
2. On September 30, a shipment of goods was sent to a customer, FOB destination. The cost of the goods shipped is $7,800, and freight, which is to be paid by Workman, will cost $200. These items are not included in the inventory count.
3. On October 2, a freight company delivered goods that cost $10,000 to Workman's warehouse. The goods had been shipped by the vendor on September 29, FOB shipping point. Freight on this shipment will amount to $500 and will be paid by the appropriate party. The goods are not included on the inventory count.
4. On September 30 a loyal customer visited Workman's retail shop and asked that certain items be set aside for him. The goods set aside have a cost of $1,300. The customer intends to let Workman know no later than October 2 whether or not he wishes to finalize the sale and have the goods shipped to his home. The freight will cost $50 and will be paid by Workman. The sales person was fairly sure the customer will take the items; and so prepared the sales invoice on September 30. The items are not included on the inventory count.
5. Residing in Workman's warehouse is merchandise costing $5,000 that was purchased in September and found to be defective. Workman's purchasing manager has arranged with the vendor to accept return of the goods and has packaged them for return shipment. The vendor processed a credit to Workman's account on September 28, and has arranged to have the goods picked up on October 1. The items are included on the inventory count.
Instructions
Calculate the correct inventory balance at September 30, 2014. For each of the above items, explain the basis of your treatment of the item.