Question

Tri-State Bank and Trust is considering giving Pharoah Company a loan. Before doing so, management decides that further discussions with Pharoah’s accountant may be desirable. One area of particular concern is the inventory account, which has a year-end balance of $326,300. Discussions with the accountant reveal the following.

1.		Pharoah shipped goods costing $42,700 to Sorci Company, FOB shipping point, on December 28. The goods are not expected to arrive at Sorci until January 12. The goods were not included in the physical inventory because they were not in the warehouse.
2.		The physical count of the inventory did not include goods costing $94,100 that were shipped to Pharoah FOB destination on December 27 and were still in transit at year-end.
3.		Pharoah received goods costing $23,400 on January 2. The goods were shipped FOB shipping point on December 26 by Solita Co. The goods were not included in the physical count.
4.		Pharoah shipped goods costing $38,600 to Natali Co., FOB destination, on December 30. The goods were received at Natali on January 8. They were not included in Pharoah's physical inventory.
5.		Pharoah received goods costing $48,500 on January 2 that were shipped FOB destination on December 29. The shipment was a rush order that was supposed to arrive December 31. This purchase was included in the ending inventory of $326,300.

Determine the correct inventory amount on December 31.

Correct inventory

$Type your answer here

Answer 1

Inventory balance					3,26,300
Add: Purchase made on FOB shipping point basis not received	23,400
Add: Sales on FOB destination basis not received by buyer yet	38600
Less: Purchase on FIB destination basis not received yet	-48500
Correct Inventory balance				3,39,800
Answer is $ 339,800