Question

Flounder Company’s inventory of $1,113,100 at December 31, 2017, was based on a physical count of goods priced at cost and before any year-end adjustments relating to the following items.

(a)		Goods shipped from a vendor f.o.b. shipping point on December 24, 2017, at an invoice cost of $67,020 to Flounder Company were received on January 4, 2018.
(b)		The physical count included $31,700 of goods billed to Sakic Corp. f.o.b. shipping point on December 31, 2017. The carrier picked up these goods on January 3, 2018.

What amount should Flounder report as inventory on its balance sheet?

Inventory to be reported

Answer 1

Under f.o.b shipping point, the title of goods passes from the seller to the buyer when the goods are delivered by seller to the common carrier.

(a)

$67,020 worth of goods are to be included in ending inventory as the shipment was made before the year end.

(b)

$31,700 worth of goods are to be included in ending inventory as the shipment was made after the year end. (these goods are already included in the ending inventory)

Inventory to be reported = $1,113,100 + $67,020

= $1,180,120