Question

At December 31, 2017 Blossom Company inventory records indicated a balance of $654000. Upon further investigation it was determined that this amount included the following:

? $130000 in inventory purchases made by Blossom shipped from the seller 12/27/17 terms FOB destination, but not due to be received until January 2nd
? $72000 in goods sold by Blossom with terms FOB destination on December 27^th. The goods are not expected to reach their destination until January 6^th
? $6400 of goods received on consignment from Dollywood Company

What is Blossom correct ending inventory balance at December 31, 2017?

Answer 1

As per the records the inventory balance is $654,000 at December 31, 2017.

• $130,000 purchase made on FOB destination, would be included in the inventory of Blossom Company after they are received. That is after January 2nd. Therefore, this amount of $130,000 is not to be included in the inventory.
• $72,000 sold on FOB destination will be recorded in the books of Blossom until they are received by the buyers. Till January 6th the inventory would be included. Therefore, no change to be made regarding this.
• Goods worth $6,400 received on consignment is not owned by Blossom company, therefore, this amount of $6,400 is not to be included in the ending inventory.

The correct ending inventory balance at December 31, 2017 is $ 517,600 ($654,000 - $130,000 - $6,400)