Question

Adams Corp., a merchandising company, has 30,000 units in its inventory on December 31. Just before closing for the day, the company ships 2,000 units to a customer. The company also receives a notice from its supplier that an order of 10,000 units has been shipped. The terms for the sale and the purchase were f.o.b. shipping point. How many units of merchandise should be included in Adam's ending inventory

Answer 1

Answer:

28,000 Units

Explanation:

The inventory that we actually have possession or the point at which the risk and reward associated with the inventory are shifted towards the company then it must recognize it. So this means, the inventory that is ordered and yet not received on board and hence must not be included in the inventory.

Closing Inventory = Opening Inventory + Inventory Received  -  Inventory Despatched

Here

Inventory Received is Zero Units

Inventory Despatched is 2,000 Units

Opening Inventory  30,000 Units

By putting the values, we have:

Closing Inventory = 30,000 Units   +  0 Units  -   2,000 Units

Closing Inventory = 28,000 Units