Answer:
Closing inventory = $289,000 + $13,190 = 302,190
Explanation:
Tamarisk inc.
In closing an inventory count consideration should be given to goods in transit. The agreements reached between buyer and seller will help in determining who is responsibility for the stock at each point in time.
An FOB (free on board) agreement means the seller of the goods is responsible for shipping the goods up to the port of destination and thereafter ownership, which includes risks and rewards for the goods is transferred to the buyer.
CIF (cost, insurance and freight). This implies the selling price of the seller already includes the cost of the product, the insurance and the freight getting it to the warehouse of the Buyer. In this instance, the ownership remains that of the seller until the products arrive the warehouse of the buyer
A. Richfield already has taken possession and even displayed it in his showroom as at Dec 31.
Action: do not add this to the closing inventory count
B. It is OK not to include the $20,180 goods in transit to the buyer as at DEC 31, because they were conditioned on an FOB agreement.
Action: do not add this to the closing inventory count
C. With a purchase consideration of FOB worth $13,190 still in transit as at Dec 31. The company needs to consider this as the risk and reward already transferred to it as agreed in the FOB terms
Action: add this to the closing inventory count
