Question

The December 31, 2018, year-end inventory balance of the Raymond Corporation is $210,000. You have been asked to review the following transactions to determine if they have been correctly recorded.

1. Goods shipped to Raymond f.o.b. destination on December 26, 2018, were received on January 2, 2019. The invoice cost of $30,000 is included in the preliminary inventory balance.

2. At year-end, Raymond held $14,000 of merchandise on consignment from the Harrison Company. This merchandise is included in the preliminary inventory balance.

3. On December 29, merchandise costing $6,000 was shipped to a customer f.o.b. shipping point and arrived at the customer's location on January 3, 2019. The merchandise is not included in the preliminary inventory balance.

4. At year-end, Raymond had merchandise costing $15,000 on consignment with the Joclyn Corporation. The merchandise is not included in the preliminary inventory balance

Answer 1

Correct adjustments to Raymond Corporation's preliminary year-end inventory should exclude the $30,000 of goods shipped f.o.b. destination not yet received and the $14,000 of consigned goods from Harrison, but include the $15,000 of goods consigned to Joclyn Corporation.

Step-by-step explanation:

The student has asked to review transactions to determine their correct recording in the year-end inventory balance for the Raymond Corporation as of December 31, 2018. Upon reviewing the transactions:

1. Goods shipped f.o.b. destination on December 26, 2018, but received on January 2, 2019, should not be included in the year-end inventory balance as ownership transfers upon delivery, thus it should be excluded from the $210,000 preliminary balance.
2. Merchandise worth $14,000 held on consignment from Harrison Company should not be included in the preliminary inventory because it is owned by the consignor until sold.
3. For the goods shipped f.o.b. shipping point on December 29, which arrived on January 3, 2019, the ownership transfers to the buyer at shipping point, so these should not be included in the inventory, which is correctly done in the preliminary balance.
4. Merchandise costing $15,000 on consignment with Joclyn Corporation should be included in Raymond's year-end inventory since it retains ownership until the consignee sells the goods.

The preliminary inventory needs adjusting to correctly reflect these transactions. It should decrease by $30,000 for the f.o.b. destination goods and by $14,000 for the consigned goods from Harrison, but increase by $15,000 for the consigned goods with Joclyn Corporation.