Question

Sandoval needs to determine its year-end inventory. The warehouse contains 24,000 units, of which 3,400 were damaged by flood and are not sellable. Another 2,400 units were purchased from Markor Company, FOB shipping point, and are currently in transit. The company also consigns goods and has 4,400 units at a consignee's location. How many units should Sandoval include in its year-end inventory

Answer 1

The year-end inventory in units = 27,400

Step-by-step explanation:

total units in warehouse = 24,000

damaged units = 3,400

Purchased units = 2,400

consigned units = 4,400

The year-end inventory is calculated as follows:

Year-end inventory = total units in warehouse - damaged units + purchase units + consigned units

= 24,000 - 3,400 + 2,400 + 4,400 = 27,400 units.

Please note

1. using Free on Board (FOB) shipping point agreement, the buyer claims ownership of the goods the moment it is shipped from the seller's shipping point, and is recorded as inventory even before it arrives at the buyer's receiving point.

2. consigned goods are goods that are part of inventory, but is located with a different distributor other than the owner of the goods.