Question

Stallman Company took a physical inventory on December 31 and determined that goods costing $200,000 were on hand. Not included in the physical count were $25,000 of goods purchased from Pelzer Corporation, f.o.b. shipping point, and $22,000 of goods sold to Alvarez Company for $30,000, f.o.b. destination. Both the Pelzer purchase and the Alvarez sale were in transit at year-end. What amount should Stallman report as its December 31

Answer 1

Answer:

Explanation:

step 1

Inventory after purchase adjustment = Inventory as per periodic inventory system + Adjustment of purchase

=$245,770+$28,480

=$274,250​

Explanation

Company S has account as per the periodic inventory system of $245,770. Company S made purchases of about $28,480 from Person P with the condition that the FOB shipping point is to be included in the record as per periodic system. The commodities are supplied by the vendor and goods are in transit.

step 2

Compute the amount of inventory which is to be reported by Company S on December 31 as given below:

Value of inventory = Amount after purchase adjustment + Sales adjustment

=$274,250+$24,980

=$299,230​

Explanation

When Company S sold the supplies to Company A with a cost of $28,480 at a sales price of $39,990. The commodities are sold at state of FOB destination which literally can be referred to mean that until and unless Company S make available the goods at destination of Company A, sale is not assumed to be complete. The commodities are still in transit which reveals that the sale to Company A won’t be recorded as sale for the period. The cost of stock is to be integrated in the cost of inventory.