Question

Godchaux Inc. took a physical inventory at December 31, 2019 and determined that €395,000 of goods were on hand. In addition, the following items were not included in the physical count: (1) €60,000 of goods purchased were in transit, shipped f.o.b. destination (goods were received by Godchaux three days on January 3, 2020) and (2) the company shipped f.o.b. destination €25,000 worth of inventory on December 29. The goods arrived at the buyer's place of business on January 2, 2020. What amount should Godchaux report as inventory at the end of 2019? O A.€395,000. O B.€455,000 C.€420,000 O D.€480,000 TER : 1993:C, DE

Answer 1

			Amount in Euro
		Amount of inventory as per physical count	395,000
		Add: Goods shipped by Godchaux inc. on 29th december on F.O.B. destination basis.	25,000
		Inventory at end of 2019 (Option C)	420,000
	Note:	F.O.B. Destination means the title of the goods are transferred to the buyer when goods are received at destination by the buyer.
		In the above case, Godchaux inc. purchased goods worth € 60,000 on F.O.B Destination basis and not received the goods till 31st december 2019. Hence, it would be included in inventory only when it is received.
		Sale made by Godchaux inc. amounting to € 25,000 on FOB destination basis and goods was not delivered till 31st december, 2019, hence ownership of the goods still lyies with Godchaux. Hence it should include such goods in its inventory.