Scrap Gold And Inventory?

Q: I have a company that buys gold from people (jewelry, coins, etc). They then send this gold to a company out of state who in turn sends them a check for the value of the gold in the item. My company does not want to recognize the value of any items that they have on hand at the end of the year as inventory. They say they only hold onto these items for a max of 30 days before they send to the out-of-state purchaser.


I think they should. What is your opinion?

A:
The length of time that a business holds or carries items does not matter. It doesn't matter that they're held for 30 days. They could be held for much longer and still qualify as inventory. What matters is that the items are held for the purpose of resale. See this inventory lesson for a clear definition and explanation of what counts as inventory.

In this case the items' "sales values" are determined by the purchaser after evaluating the quantity of gold existing in each of the items.

Also, these (possible) inventory are not sold as-is. Instead, they are changed (albeit by the purchaser) - the items are dismantled and the gold extracted.

In my opinion it would be difficult to count these items (coins, jewelry, etc.) as inventory. Not because scrap gold could not be counted as inventory. But because the gold is essentially valued only after it is sold. Think of it this way: how do you determine what the carrying amount of the inventory is when the purchaser (not you) determines their value, and only after they are shipped out of your warehouse?

So I would agree and recognize them as a purchasing expense.

Either way, I would recommend consulting a professionally qualified accountant for expert advice.


Do
you think the coins and jewelry could qualify as inventory? Send us your comments.

Comments for Scrap Gold And Inventory?

Click here to add your own comments

reply
by: Sona

This site is helping many of the accounting students out there by offering great post that can help the students know more about their subject of study. This is the reason I have referred many of my students to the website.

Click here to add your own comments

Return to Ask a Question About This Lesson!.






Enjoying this Website?
Help Support it with a Donation

OR...





Advertise on ventoup.ru


Related pages


fifo advantagesdefine book keeperaccounts receivable debtorsfifo in accountingmultistep income statementhow to do cash budget accountingtally ownerexamples of t accounts debits and creditsquestions on journal ledger and trial balancecalculating total liabilitieswhere does petty cash go on the balance sheethow to calculate vat payablet accounts and journal entriesstandard accounting equationmeaning of arrears in hindibookkeeping and accountancy notes in hindisynonym for monetaryphysical count of inventory journal entryprepaid rent debit or creditdifference between account payable and account receivablehow to calculate markup percentageassets liability owners equitygeneral entries of accounts payablemeaning of sundry debtorsreserve for bad debtsdebtor vs creditordeferred expense journal entrylcci level 1 exercisecash flow statement example direct methodhow to compute markup percentagehow to calculate closing stock without gross profitperpetual system inventorydefine equitieshow do you deduct vat from a figureamt calculation formuladirect expenses and indirect expensesprofit and loss statement templatesfinancial statement adalahretained earnings debitstatement of partner's equitythe last lesson summary in hindiyear end closing entries examplesaccounting entries for vatcash flow statement format in excel indiaaccounting for idiotsbalancing of ledger accountscash outflowswhat account has a normal debit balancesample p&l statement small businesshow to calculate direct materials costaccruals meaning in accountingfactory overhead cost examplesgp percentage formulacalculating gross profit ratioexamples of factory overheadssales ledger samplecalculate lifodefine drawings in accountingprofit and loss statement worksheetdebtors control account examplecash flow statement samplesprepaid rent expense journal entrycredit debit accounting charthow to compute cash flowdefinition of manufacturing overheadlifo fifo and weighted averagesole proprietor accountingassets liability equitypartnership financial statements templatewhat does perpetual inventory meanadvantages and disadvantages of lifo methodbills receivable and bills payable meaningjournaling accountingdirect labor and indirect laborwhy we prepare trial balancefrees samplesunearned revenue liability