Question

Larkspur, Inc. took a physical inventory on December 31 and determined that goods costing $235,000 were on hand. Not included in the physical count were $25,800 of goods purchased from Pelzer Corporation, FOB shipping point, and $22,000 of goods sold to Alvarez Company for $28,600, FOB destination. Both the Pelzer purchase and the Alvarez sale were in transit at year-end.

What amount should Larkspur report as its December 31 inventory?

Answer 1

Larkspur should report December 31 inventory as :-

Particulars	Amount
Goods on hand	$235,000
Add - Goods not included in physical count	25,800
Add - Goods at FOB Shipping point	22,000
Inventory to be reported	$282,800

FOB shipping point means the purchaser gains title on the merchandise at the shipping point, so when pelzer shipped the good it belongs to larkspur inc.

FOB destination means the seller maintains the goods until it reaches the destination, so larkspur has the possession of the goods.

If you have any doubts please comment on the answer.