Question

Umatilla Bank and Trust is considering giving Oriole Company a loan. Before doing so, it decides...

Umatilla Bank and Trust is considering giving Oriole Company a loan. Before doing so, it decides that further discussions with Oriole’s accountant may be desirable. One area of particular concern is the Inventory account, which has a year-end balance of $263,520. Discussions with the accountant reveal the following. 1. Oriole shipped goods costing $52,160 to Hemlock Company FOB shipping point on December 28. The goods are not expected to reach Hemlock until January 12. The goods were not included in the physical inventory because they were not in the warehouse. 2. The physical count of the inventory did not include goods costing $87,860 that were shipped to Oriole FOB destination on December 27 and were still in transit at year-end. 3. Oriole received goods costing $24,880 on January 2. The goods were shipped FOB shipping point on December 26 by Yanice Co. The goods were not included in the physical count. 4. Oriole shipped goods costing $52,890 to Ehler of Canada FOB destination on December 30. The goods were received in Canada on January 8. They were not included in Oriole physical inventory. 5. Oriole received goods costing $38,830 on January 2 that were shipped FOB destination on December 29. The shipment was a rush order that was supposed to arrive December 31. This purchase was included in the ending inventory of $263,520. Determine the correct inventory amount on December 31. What is the correct inventory amount on December 31?

Homework Answers

Answer #1
Unadjusted Inventory $                              2,63,520
1 $                                          -   Sales is FOB Shipping, therefore ownership transferred, not to be included in inventory
2 $                                          -   Purchase is FOB Destination, will be included in inventory once received
3 $                                  24,880 Purchase is FOB shipping, so it will be part of inventory
4 $                                  52,890 Sales is FOB Destination, will still be part of inventory
5 $                                -38,830 Purchase is FOB Destination, will be included in inventory once received
Correct Inventory $                              3,02,460
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