Question

Bonita Industries took a physical inventory on December 31 and determined that goods costing $210,000 were on hand. Not included in the physical count were $24,000 of goods purchased from Metlock, Inc., FOB, shipping point, and $24,500 of goods sold to Whispering Winds Corp. for $34,000, FOB destination. Both the Metlock purchase and the Whispering Winds sale were in transit at year-end. What amount should Bonita report as its December 31 inventory?

Answer 1

Answer:

$258,500

Explanation:

The terms FOB shipping point indicates that ownership of the goods will passes to the buyer immediately the goods are accepted or collected from the seller by the public carrier. Since the goods in the question are already in transit, they should be added to the closing stock.

FOB destination destination implies ownership of the goods passes to the buyer at the destination. Since the goods in the questions are still in transit, they should be included in the closing stock.

Therefore, we have:

December 31 inventory = $210,000 + $24,000 + $24,500 = $258,500

Therefore, Bonita should report $258,500 as its December 31 inventory,