Question

ABC Trading Co. commenced operations during the year as a large importer and exporter of sundries. The imports were all from one country overseas. The export sales were conducted as drop shipments. ABC never actually took possession of the goods, which were merely transshipped at Houston. ABC Trading reported the following data: Purchases during the year $15.0 million Shipping costs from overseas $1.5 million Shipping costs to export customers $1.0 million Inventory at year end $3.0 million. What amount of shipping costs should be included in ABC Trading's year-end inventory valuation?

Answer 1

Answer:

the total amount for inventory will be 1,800,000

as there are 300,000 freigh-in capitalize through inventory.

Explanation:

the company will capitalize all the cost necessary for have the goods ready to use and sale.

Those include the freight-in which are capitalize through inventory

the freight-out (for exports) are a decrease on sales revenues

15,000,000 had  1,500,000 freight-in

3,000,000 had    300,000 freight-in

                           1,800,000