Question

Umatilla Bank and Trust is considering giving Bridgeport Corp. a loan. Before doing so, it decides that further discussions with Bridgeport Corp.'s accountant may be desirable. One area of particular concern is the Inventory account, which has a year-end balance of $302,140. Discussions with the accountant reveal the following 1. Bridgeport Corp. sold goods costing $57,920 to Hemlock Company FOB shipping point on December 28. The goods are not expected to reach Hemlock untl 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 $104,150 that were shipped to Bridgeport Corp. POB destination on December 27 and were s in transit at yyear- end. 7 8 3. Bridgeport Corp. received goods costing $26,820 on January 2. The goods were shipped POB shipping point on December 26 by Yanice Ca. The goods were not induded in the physical count. 4. Bridgeport Corn, sold goods costing $48.100 to Ehier of Canada FOB destination on December 30. The goods were received in Canada on January 8. They were not included in Bridgeport Corp. physical inventory 5. Bridgeport Corp. received goods costing $39,130 on January 2 that were shipped FOB destination on December 29. The shipment was a nuah order that was spposed to arives December 31. This purchase was included in the ending inventory of $302,140 re sults by Study Determine the correct inventory amount on December 31. The correct inventory amount on December 31

Answer 1

Umatilla Bank and Trust Determine the correct inventory amount on December 31 Closing Inventory Balance Goods received on Jan 2 from Yanice Co 302140 26820 Goods sold on Dec 30 to Ehler 48100 Goods received on Jan 2 -39130 Correct Closing Inventory 337930 3.Since the goods have been shipped FOB shipping,it indicates that the ownership of goods has been transferred from the seller to the buyer.The owner of goods in this case would be Ivanhoe and hence it should be included in the value of inventory. 4.Since the goods have been sold by Ivanhoe as FOB destination the ownership of goods has still not transferred from the seller to buyer in this case.Therefore, Ivanhoe would continue to be |the owner of the goods and its value should be included in Ivanhoe's ending inventory as the buyer has still not received the goods. 5.Since the goods were shipped as FOB destination,Ivanhoe would not be considered as the owner of the goods even if the shipment has taken place before 31st December as ownership in this case would get transferred only once the goods have been received by Ivanhoe. Therefore, its value will be reduced from the balance of inventory as on 31st December