Inventory Issue

[TAX]

Client sold S crop business.

Sale Date = 04/30/2007

Sale price breakdown as follow

Equipment = 220,000 - No issue
Goodwill = 30,000 - No Issue
Inventory = 64,000 - How should I handle?
Total Sale price = 314000

Balances as of 01/01/07
Beg Inventory as of 01/01/07 = 84000
Purchases - 01-01/07 - 04/30/07 = 100,000
Sales for 2007= 109,224

End inventory as of 04/30/2007 = 0 - business sold

Does this mean client lost money on inventory?

Thanks!

[Matt Sova]

inventory sold

This is just ordinary sales.

[Jesse]

Balances as of 01/01/07
Beg Inventory as of 01/01/07 = 84000
Purchases - 01-01/07 - 04/30/07 = 100,000
Sales for 2007= 109,224

End inventory as of 04/30/2007 = 0 - business sold

Assuming the $64,000 is a mixture of the BI and Purchases and the Sales for 2007 does Not include the $64,000 he does have a loss on the inventory.


Sales = 109,224 + 64,000 = 173,224 - 184,000 = (10,776) ordinary loss

84,000 BI
+100,000Purchases
=184,000Cost of Good Sold

[Roland Slugg]

Agree with the above replies

The $64,000 should be added to sales, and the Inventory account should be zeroed out to either Purchases or COGS. The "loss" of about $11,000 upon liquidation of the inventory will simply become part of the COGS total in the company's final year.

[TAX]

Thank you

Thank you all for help!

[veritas]

Here's some more help

We've had this discussion berfore.

http://www.thetaxbook.com/forums/showthread.php?t=2962&highlight=oldjack+inventory