Nomar Co. shipped inventory on consignment to Seabright Co. that cost $20,000. Seabright paid $500 for advertising that was reimbursable from Nomar. At the end of the year, 70% of the inventory was sold for $30,000. The agreement states that a commission of 20% will be provided to Seabright for all sales.

 Nomar Co. shipped inventory on consignment to Seabright Co. that cost $20,000. Seabright paid $500 for advertising that was reimbursable from Nomar. At the end of the year, 70% of the inventory was sold for $30,000. The agreement states that a commission of 20% will be provided to Seabright for all sales.

What amount of net inventory on consignment remains on the balance sheet for the first year for Nomar?

$0
$6,000
$6,500
$20,000
 You Answered Correctly!

$6,000

Explanation

 
Nomar includes in its inventory account items of inventory it owns, regardless of its location. Nomar's inventory on consignment at Seabright continues to be owned by Nomar and is included in Nomar's inventory at cost. 70% of the inventory shipped has been sold.

Therefore, only 30%, or $6,000 (.30 × $20,000), remains in ending inventory. The commission and advertising costs are not inventory costs and are not included in inventory.