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Expert Answer
5.
Inventory balance as on December 31, 2016=$250,000(based on physical inventory count)
1.Goods shipped to Kwork fob destination on December 20,2016 received on January 4, 2017.
Since this is fob destination contract sale occurs on reaching destination ie, on January 4, 2017.
Hence , this need not be considered in 2016 balance sheet.
2.Goods shipped to kwork fob shipping point on December 28, 2016 and arrived onJanuary 5, 2017.This amount of $34,000 to be considered in inventory of 2016 since sell occurs when shipped(fob shipping point)
3.Goods shipped from Kwork fob destination on December 27 should be added to inventory , since sale has not occurred. Amount of $39,000(merchandise cost) to be added to inventory since it is received by customer on January 3. Sale occurs on January 3
4.Goods shipped from Kwork fob destination on December 26 and arrived at destination on December 30, 2016. Sale occurred on December 30. Hence it is not part of Kwork inventory as on December 31, 2016. This need not be added to inventory as on December 31, 2016
5.Goods shipped from Kwork to customer fob shipping point on December 28, 2016. Sale has occurred on December 28, since it is Fob shipping point contract. This is not part of inventory of the year ending December 31.
Hence,
Correct inventory amount to be reported:
$250,000+$34,000+$39,000= $ 323,000
| Correct inventory amount to be reported | $ 323,000 |
6.
1.Goods shipped to Raymond fob destination reaching on January 2, 2017 should not be included , since sales occurred on January 2, 2017
$34,000 to be reduced
2.Merchandise on consignment of $18,000 is not part of Raymond’s inventory . This should not be included in inventory.This amount of $18,000 should be reduced
3.Merchandise shipped to customer fob shipping point on December 29 is not part of inventory, since sale has occurred on December 29,2016.
4.Merchandise on consignment $19,000 with Jodyn Corporation should be included, since the ownership is with Raymond.
Correct inventory balance=$218,000-$34,000-$18,000+$19,000= $ 185,000
| Correct inventory amount to be reported | $ 185,000 |
