The following items were included in Venicio Corporation’s inventory account at December 31, year 1:

 The following items were included in Venicio Corporation’s inventory account at December 31, year 1:
        
•    Merchandise out on consignment, at sales price, including 40% margin on sales    $14,000
•    Goods purchased, in transit, shipped FOB shipping point    12,000
•    Goods held on consignment by Venicio    9,000
          
 Venicio’s inventory account at December 31, year 1, should be reduced by
$14,600 correct
$17,400
$23,000
$35,000
 

Answer

 $14,600 correct

Explanation

 The inventory account should be reduced by two amounts.  The merchandise out on consignment should be priced at cost, not retail.  Inventory should be reduced by the $5,600 margin on sales ($14,000 × 40%).  The goods purchased FOB shipping point are appropriately included in the inventory account as the title has transferred to Venicio; no adjustment is necessary. Finally, the inventory account should be reduced for the goods held on consignment by Venicio.  These goods are owned by the consignor, not Venicio.

 Consignment inventory margin on sales    $ (5,600)
Goods held on consignment    (9,000)
     $(14,600)