D is correct. The requirement is to determine the amount of shipping costs that should be included in Seafood Trading’s year-end inventory valuation. The shipping costs to export to customers are a selling expense and not included in inventory. Shipping costs or freight-in necessary to get the inventory in place to sell should be recorded in inventory. Seafood Trading should include a proportionate amount of the shipping costs of $1.5 million in ending inventory. The correct answer is that $375,000 in shipping costs [($3.0 million ÷ $12.0 million) × $1.5 million] should be included in the cost of ending inventory.

A is incorrect.   The shipping costs to export to customers are a selling expense and not included in inventory. Shipping costs or freight-in necessary to get the inventory in place to sell should be recorded in inventory. Seafood Trading should include a proportionate amount of the shipping costs of $1.5 million in ending inventory. The correct answer is that $375,000 in shipping costs [($3.0 million ÷ $12.0 million) × $1.5 million] should be included in the cost of ending inventory.​

B is incorrect.   The shipping costs to export to customers are a selling expense and not included in inventory. Shipping costs or freight-in necessary to get the inventory in place to sell should be recorded in inventory. Seafood Trading should include a proportionate amount of the shipping costs of $1.5 million in ending inventory. The correct answer is that $375,000 in shipping costs [($3.0 million ÷ $12.0 million) × $1.5 million] should be included in the cost of ending inventory.

C is incorrect.   The shipping costs to export to customers are a selling expense and not included in inventory. Shipping costs or freight-in necessary to get the inventory in place to sell should be recorded in inventory. Seafood Trading should include a proportionate amount of the shipping costs of $1.5 million in ending inventory. The correct answer is that $375,000 in shipping costs [($3.0 million ÷ $12.0 million) × $1.5 million] should be included in the cost of ending inventory.​​