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Splish Brothers Inc. took a physical inventory on December 31 and determined that goods costing $226,000...

Splish Brothers Inc. took a physical inventory on December 31 and determined that goods costing $226,000 were on hand. Not included in the physical count were $31,000 of goods purchased from Novak Corp., FOB, shipping point, and $26,500 of goods sold to Crane Company for $33,000, FOB destination. Both the Novak purchase and the Crane sale were in transit at year-end.

What amount should Splish Brothers report as its December 31 inventory?
Ending Inventory: $?

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Answer #1

Answer- Splish Brothers should report as its December 31 inventory =$283500.

Explanation- Ending inventory = Inventory in hand +Goods purchased from Novak Corp. + Goods sold to Crane company

= $226000+$31000+$26500

= $283500

Where- FOB shipping point means the purchaser (Splish Brothers Inc.) having title to the merchandise at the shipping point, so when Novak Corp. shipped the goods hence goods should be included in inventory of purchaser.

FOB destination means the seller (Splish Brothers Inc.) maintains title until the merchandise reaches its destination (ie-to the purchaser) so since the goods have not reached their destination, the goods still included in inventory of seller.

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