Gerard Limited reported inventory of $ 689,600 and accounts payable to suppliers of $ 456,300 for the year ended 31 December 20X6. The company has a periodic inventory system, and the inventory value given is the result of the physical count.

a. The inventory count took place on 31 December. Late in the day on 31 December, goods with a cost of $ 54,300 and a retail price of $ 98,500 were delivered to a customer. These goods had been counted earlier in the day and were included in the inventory count. The company did not record the sale until 3 January due to the New Year’s break.

b. Goods from a supplier, in transit on 31 December, were neither counted nor recorded as a purchase and account payable as of 31 December. The goods, with a cost of $ 37,500, legally belonged to Gerard while they were in transit over the year- end.

c. Goods received from a supplier on 30 December were counted and included in inventory, but the invoice had not been recorded as a purchase or accounts payable by the end of December. The invoice was for $ 51,100.

d. On 4 January 20X7, a $ 5,000 bill for freight for the month of December was received. The freight was for goods bought from a supplier and delivered to the Gerard warehouse. None of these goods has been resold.

e. The inventory count was subsequently determined to include $ 21,900 of goods on consignment from a supplier; the goods have to be paid for only if they are sold to Gerard’s customers.

f. Gerard had goods with a recorded cost of $ 12,700 that were properly recorded as a purchase and account payable, and counted in inventory. However, the goods were damaged and Gerard entered into negotiations with the supplier that resulted in a discount of $ 4,000 off the price. The negotiations were completed in early January 20X7.

g. Market value of remaining inventory after any adjustments appropriate for items (a)–(f), at NRV, was determined to be $ 605,000. The allowance to reduce inventory to NRV, unchanged for the end of the last fiscal period, was $ 32,200.

Required: 

1. Calculate the correct balances for inventory (net) and accounts payable, as of 31 December 20X6.

2. Calculate the holding loss on inventory that will appear on the income statement for the year ended 31 December 20X6.

3. Assume that cost of goods sold had been calculated to be $ 2,211,400 based on the original physical count. What is the new cost of goods sold? Assume that the holding loss on inventory is reported as part of cost of goods sold.