Question

Multiple choice

At December 31, 2022, Wildhorse Co. inventory records indicated a balance of $865000. Upon further investigation it was determined that this amount included the following:

▪ $184000 in inventory purchases made by Wildhorse shipped from the seller 12/27/22 terms FOB destination, but not due to be received until January 2nd
▪ $104000 in goods sold by Wildhorse with terms FOB destination on December 27. The goods are not expected to reach their destination until January 6.
▪ $10700 of goods received on consignment from Tammy Company

What is Wildhorse's correct ending inventory balance at December 31, 2022?

$854300

$670300

$681000

$566300

Answer 1

Answer is $670,300

Transaction 1:

Wildhorse purchased on term FOB destination which means that ownership of goods will be transferred on reach their final place. Therefore, Wildhorse will have the ownership of these goods on January 2. Therefore, we need to deduct these goods from inventory.

Transaction 2:

Wildhorse sold goods on term FOB destination which means that ownership of these goods lies with Wildhorse. Therefore, we will not make any adjustment for these goods.

Transaction 3:

Wildhorse received these goods on consignment which means that ownership of these goods still lies with Tammy Company. Therefore, we need to deduct these goods from inventory.

Correct Ending Balance = $865,000 - $184,000 - $10,700
Correct Ending Balance = $670,300