In your audit of Henry Company, you find that a physical
inventory on December 31, 2017, showed merchandise with a cost of
$411,580 was on hand at that date. You also discover the following
items were all excluded from the $411,580.
|1.||Merchandise of $60,710 which is held by Henry on consignment. The consignor is the Max Suzuki Company.|
|2.||Merchandise costing $38,360 which was shipped by Henry f.o.b. destination to a customer on December 31, 2017. The customer was expected to receive the merchandise on January 6, 2018.|
|3.||Merchandise costing $46,920 which was shipped by Henry f.o.b. shipping point to a customer on December 29, 2017. The customer was scheduled to receive the merchandise on January 2, 2018.|
|4.||Merchandise costing $82,010 shipped by a vendor f.o.b. destination on December 30, 2017, and received by Henry on January 4, 2018.|
|5.||Merchandise costing $55,300 shipped by a vendor f.o.b. shipping point on December 31, 2017, and received by Henry on January 5, 2018.|
Based on the above information, calculate the amount that should appear on Henry’s balance sheet at December 31, 2017, for inventory.
|merchandise cost reported||$ 411,580.00|
|add:inventory shipped FOB destination||$ 38,360.00|
|Add:inventory shipped by vendor FOB shipping point||$ 55,300.00|
|cost of inventory to be reported in balance sheet||$ 505,240.00|
(Note:Under FOB shipping point the title to the goods passes from the seller to the buyer when the goods are shipped ad under FOB destination
It passes when the goods are received by buyer
|hence FOB destination $38360 goods title has not passed to the buyer and needs to be added in his inventory|
|Whereas $55300 was shipped by seller on Dec 31 FOB shipping point and hence title passed to henry on that date|
|And in case of point 3 title transferred to buyer on Dec 29 hence rightly excluded from henry inventory|
|and in 4th the title will pass when goods will be received in December|
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