Question

Oriole Company took a physical inventory on December 31 and determined that goods costing $250,000 were on hand. Not included in the physical count were $20,000 of goods purchased from Pelzer Corporation, FOB shipping point, and $17,000 of goods sold to Alvarez Company for $25,000 FOB destination. Both the Pelzer purchase and the Alvarez sale were in transit at year-end. What amount should Oriole report as its December 31 inventory?

Answer 1

The answer is given below;

Step-by-step explanation:

Inventory- Unadjusted $250,000

Goods purchased-FOB shipping point $25,000

Goods sold to alvarez-FOB Destination $17,000

Total inventory to be reported at December 31 $292,000

Please note that in FOB shipping point,the sale and purchase is recorded when goods are dispatched from seller's warehouse.In our case, we have recorded purchase.

In case of FOB destination,sale and purchase are not recorded untill the goods are received by the buyer.In our case we have not recorded sale as the inventory is in transit rather we record it is as inventory stock as it was previously omitted from it.