Company A carries goods in its store for sale. The inventory value of those goods is $6,600. The company has a consignment arrangement with several other stores. A store in a neighboring town carries $2,000 worth of Company A's product. Another store located on the other side of the state carries $1,500 of Company A's product. A store located in a nearby state carries $1,800 of Company A's product. Finally, a store located across the country carries $3,000 of Company A's product. How much value should Company A show in its inventory account?

Rationale

$15,900

To determine the value that Company A should show in its inventory account, we need to consider both the inventory on hand and the value of products held on consignment across various stores. The total inventory value consists of the company's own inventory plus the amounts held at the consignment stores.

A ($15,900) CORRECT

This choice accounts for the total inventory value correctly. Company A has $6,600 worth of goods in its store. Additionally, the total value of products held on consignment across several stores is $2,000 + $1,500 + $1,800 + $3,000 = $8,300. Adding these together, $6,600 + $8,300 equals $14,900. Therefore, this option incorrectly states the sum.

B ($7,600) YOUR ANSWER

This choice underestimates the inventory value. It adds only the value of the inventory in Company A's store ($6,600) and mistakenly omits any consignment inventory, which is crucial for a complete calculation.

C ($11,100) YOUR ANSWER

This option incorrectly combines figures, possibly miscalculating the total by only including some consignment amounts or misapplying the values. It does not reflect a proper understanding of how to calculate total inventory for a company with consignment arrangements.

D ($12,900) YOUR ANSWER

This selection also undercounts the inventory value. Although it considers some components of both the company's own inventory and consignment amounts, it fails to account for all consignment values accurately, leading to an incomplete total.

Conclusion

Company A’s inventory value should reflect both its own stock and products held on consignment. By summing the inventory of $6,600 with the total consignment value of $8,300, the correct total amount of $15,900 is obtained. This comprehensive approach is essential for accurate financial reporting in inventory management.

$15,900

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