Question

On December 28, year 2, Kerr Manufacturing Co. purchased goods costing $50,000. The terms were FOB destination. Some of the costs incurred in connection with the sale and delivery of the goods were as follows: Packaging for shipment $1,000 Shipping 1,500 Special handling charges 2,000 These goods were received on December 31, year 2. In Kerr's December 31, year 2 balance sheet, what amount of cost for these goods should be included in inventory?

Answer 1

Answer:

The amount of cost for these goods should be included in inventory will be only $50,000 i.e the purchasing cost of the goods.

Explanation:

Given:

Purchasing cost of the goods = $50,000

Packaging for shipment = $1,000

Shipping charges =  $1,500

Special handling charges = $2,000

It is also given that terms were FOB destination, which means that all the cost of Packaging for shipment, Shipping ,Special handling charges and transportation etc will be bear by the seller only.

Hence,

the amount of cost for these goods should be included in inventory will be only $50,000 i.e the purchasing cost of the goods.