Cranbrook Used Books experienced the following events during the current year:

Incurred $12,000 in selling costs.
Took an inventory at year-end and learned that goods costing $115,000 were on hand. This compared with a beginning inventory of $78,000 on January 1.
Purchased $172,000 of merchandise.
Incurred $56,000 of administrative costs.
Determined that sales revenue during the year was $187,000.
Paid $4,500 for transportation-in costs.
Debited all costs incurred to the appropriate account and credited to Accounts Payable. All sales were for cash.
Required:
Give the amounts for the following items in the Merchandise Inventory account:

ending balance:
transfers in:
beginning balance:
transfers out:

To determine the various amounts in the Merchandise Inventory account, let's break down the information and compute the required values:

### Given Information:
- **Beginning inventory**: $78,000
- **Goods purchased**: $172,000
- **Transportation-in costs**: $4,500
- **Ending inventory**: $115,000
- **Sales revenue**: $187,000
- **Selling costs**: $12,000 (Not directly related to the Merchandise Inventory)
- **Administrative costs**: $56,000 (Not directly related to the Merchandise Inventory)

---

### 1. **Ending balance** (this is the ending inventory):
- This is given directly in the problem.
  - **Ending balance** = $115,000

### 2. **Transfers in** (the cost of goods purchased, including transportation-in costs):
- Purchases during the year were $172,000.
- Transportation-in costs are added to the cost of goods, so:
  - **Transfers in** = $172,000 + $4,500 = $176,500

### 3. **Beginning balance** (the starting inventory on January 1):
- This is also given directly in the problem.
  - **Beginning balance** = $78,000

### 4. **Transfers out** (the cost of goods sold):
- To calculate the cost of goods sold (transfers out), we use the following formula:
  \[
  \text{Cost of goods sold (COGS)} = \text{Beginning inventory} + \text{Transfers in (purchases)} - \text{Ending inventory}
  \]
  Plugging in the values:
  \[
  \text{COGS} = 78,000 + 176,500 - 115,000 = 139,500
  \]
  - **Transfers out (COGS)** = $139,500

---

### Final Summary:
1. **Ending balance**: $115,000
2. **Transfers in**: $176,500
3. **Beginning balance**: $78,000
4. **Transfers out (COGS)**: $139,500

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Would you like more details or have any questions on the process? Here are some additional related questions:

1. How would the financial statements reflect these inventory transactions?
2. How do transportation-in costs affect inventory valuation?
3. What would happen if the ending inventory was overestimated?
4. How would the company record the sales revenue and cost of goods sold in journal entries?
5. How could selling and administrative costs impact the net income calculation?

**Tip:** Keep in mind that transportation-in costs increase the overall value of inventory, which then impacts the cost of goods sold and ultimately the gross profit.

Learn how to calculate the ending balance, transfers in, and transfers out for a merchandise inventory account. This problem covers core accounting concepts, including inventory valuation, cost of goods sold, and basic arithmetic. Suitable for business and accounting students.

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