Question

At December 31, 2017 Vaughn Manufacturing's inventory records indicated a balance of $877000. Upon further investigation it was determined that this amount included the following: $170000 in inventory purchases made by Vaughn shipped from the seller 12/27/17 terms FOB destination, but not due to be received until January 2nd • $111000 in goods sold by Vaughn with terms FOB destination on December 27th. The goods are not expected to reach their destination until rse January 6th • $7500 of goods received on consignment from Westwood Company What is Vaughn correct ending inventory balance at December 31, 2017? rces $707000 $699500 $588500 $869500 Iner lon

Answer 1

Solution:

Ending Inventory at December 31,2017 is $ 699,500

Particulars	Amount $
Ending Inventory before adjustments	$          877,000
Less:
Inventory purchased on FOB destination	$       (170,000)
Inventory sold on FOB destination	$                     -
Goods received on Consignment	$            (7,500)
Ending Inventory at December 31,2017	$          699,500

Notes:

1) If goods delivered on basis of FOB Destination, the ownership of the goods will remain in the hands of seller until the goods reaches the buyer place.

2) In the question, the Vaughn company purchased on FOB destination which means seller will possess the ownership until goods reaches destination.

3) Vaughn company sold goods on FOB destination which means vaughn can include such goods in ending inventory calculation.

4) Vaughn company received goods on consignment from westwood company, as per consignment rules goods are property of consignor(westwood company) untill there are sold by consignee(vaughn company). So, such goods should decrease from ending inventory of vaughn company.

5) So, Remaining options are Incorrect.