Question 2

Erik Gordon is observing the inventory count for NBA Inc. on December 31, year 1. The company reports a physical count of $835,000 of inventory on hand. Erik noted the following while he was observing the count:

1. Inventory that cost $3,800 was included in the count and was shipped from the NBA warehouse later on the afternoon of December 31, FOB destination. The sales price was $4,500. The inventory was received on January 2, year 2.
2. NBA purchased inventory at a cost of $3,100. The goods were shipped FOB shipping point on December 31, and arrived on January 4, year 2. NBA intended to sell the inventory in the future for a price of $4,400. The inventory was not included in the count.
3. $9,400 of inventory was included in the count was held on consignment from Arthur Inc.
4. Erik obtained a listing that showed two companies where NBA had placed consignment inventory: Rush Inc. held $2,900 worth of inventory and Dorsey Inc. held another $6,600 worth of inventory on behalf of NBA. These were not included in the physical count.
5. During the count, inventory with a book value of $7,200 was received at the shipping dock, and was set aside and not included in the count. Another shipment of $8,300 was in route to NBA, but arrived on January 2, year 2, and was not included in the count. Both shipments were FOB destination.

What is the correct ending balance that NBA should report for its ending inventory as of December 31, year 1? If any item is not to be included, explain briefly.

Question 3

Diablo Inc. markets a number of self-defense products. One if its products, the War Scepter (WS), is especially popular with its paladin customers.

Diablo had the following purchases and sales in 2015 and 2016:

Date	Quantity	Purchase Price / Sales Price
Opening Inventory, Jan 1, 2015	300	$20
Purchase, February 15, 2015	200	60
Sale, April 28, 2015	300	230
Purchase, May 1, 2015	200	70
Sale, October 8, 2015	200	230
Purchase, December 30, 2015	200	80
Closing Inventory, Dec 31, 2015	400	?

1. Assume that Diablo uses the LIFO cost flow assumption to account for inventory and a perpetual inventory system. What is the ending inventory cost for 2015?
2. Assume that Diablo uses the LIFO cost flow assumption to account for inventory and a periodic inventory system. What is the ending inventory cost for 2015?
3. Assume that Diablo uses the average cost flow assumption to account for inventory and a perpetual inventory system. What is the ending inventory cost for 2015?