Question

Cheyenne Corp. took a physical inventory on December 31 and determined that goods costing $200,000 were on hand. Not included in the physical count were $26,400 of goods purchased from Pelzer Corporation, FOB shipping point, and $21,400 of goods sold to Alvarez Company for $28,200, FOB destination. Both the Pelzer purchase and the Alvarez sale were in transit at year-end. What amount should Stallman report as its December 31 inventory?

Answer 1

Answer:

$247,800‬

Explanation:

Inventory December 31

physical inventory on December 31                           $200,000

Add: Goods purchased FOB shipping point                $26,400

Add: Goods sold FOB Destination                               $21,400

                                                                                      $247,800‬

FOB Shipping Point - the purchaser gains title to the inventory at the shipping point, so when Pelzer shipped the goods, they belonged to Stallman.

FOB destination - means the seller maintains title until the merchandise reaches its destination, so since the goods have not reached their destination, the goods still belonged to Stallman