Question

Umatilla Bank and Trust is considering giving Pronghorn Corp a loan. Before doing so, it decides that further discussions with Pronghorn Corp’s accountant may be desirable. One area of particular concern is the Inventory account, which has a year-end balance of $277,880. Discussions with the accountant reveal the following.
1. Pronghorn Corp sold goods costing $54,380 to Hemlock Company FOB shipping point on December 28. The goods are not expected to reach Hemlock until 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 $96,250 that were shipped to Pronghorn Corp FOB destination on December 27 and were still in transit at year-end.
3. Pronghorn Corp received goods costing $27,180 on January 2. The goods were shipped FOB shipping point on December 26 by Yanice Co. The goods were not included in the physical count.
4. Pronghorn Corp sold goods costing $46,830 to Ehler of Canada FOB destination on December 30. The goods were received in Canada on January 8. They were not included in Pronghorn Corp physical inventory.
5. Pronghorn Corp received goods costing $45,270 on January 2 that were shipped FOB destination on December 29. The shipment was a rush order that was supposed to arrive December 31. This purchase was included in the ending inventory of $277,880.

Answer 1

Answer:

$306,620

Explanation:

Umatilla Bank and Trust

The Unadjusted inventory is $277,880

Adjustments:

1. No adjustment because the ownership is already been transferred to the buyer at shipping point.

Hence , the goods are not included in value of inventory.

2. No adjustment as the ownership will as well make transfer once the other pay will receive the inventory but the inventory is not yet recieved.

3. 27,180 ownership is with Pronghorn Corp that means it should be included in the inventory

4. 46,830 ownership is been retained by Pronghorn Corp, the inventory will as well be be included

5. 45,270 ownership is not been retained be

by Pronghorn Corp, which means it has to be excluded from the inventory.

Hence:

The adjusted inventory will be:

277,880 +27,180+46,830-45,270

= $306,620