Question

The December 31, 2021, year-end inventory balance of the Raymond Corporation is $228,000. You have been...

The December 31, 2021, year-end inventory balance of the Raymond Corporation is $228,000. You have been asked to review the following transactions to determine if they have been correctly recorded.

  1. Goods shipped to Raymond f.o.b. destination on December 26, 2021, were received on January 2, 2022. The invoice cost of $39,000 is included in the preliminary inventory balance.
  2. At year-end, Raymond held $23,000 of merchandise on consignment from the Harrison Company. This merchandise is included in the preliminary inventory balance.
  3. On December 29, merchandise costing $6,900 was shipped to a customer f.o.b. shipping point and arrived at the customer’s location on January 3, 2022. The merchandise is not included in the preliminary inventory balance.
  4. At year-end, Raymond had merchandise costing $24,000 on consignment with the Joclyn Corporation. The merchandise is not included in the preliminary inventory balance.


Required:
Determine the correct inventory amount to be reported in Raymond’s 2021 balance sheet.

CORRECT INVENTORY BALANCE:

Homework Answers

Answer #1

The following table shows the calculation of correct inventory amount to be reported in Raymond's 2021 balance sheet:

Working note:

f.o.b destination means title to the goods assigned to the buyer from the supplier when the goods reached the destination.

Here goods reached the destination on January 3, 2022. So the title remains with the supplier. Hence inventory is to be excluded from December 31,2021.

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