Question

The Kwok Company’s inventory balance on December 31, 2021, was $215,000 (based on a 12/31/2021 physical count) before considering the following transactions:
1. Goods shipped to Kwok f.o.b. destination on December 20, 2021, were received on January 4, 2022. The invoice cost was $40,000.
2. Goods shipped to Kwok f.o.b. shipping point on December 28, 2021, were received on January 5, 2022. The invoice cost was $27,000.
3. Goods shipped from Kwok to a customer f.o.b. destination on December 27, 2021, were received by the customer on January 3, 2022. The sales price was $50,000 and the merchandise cost $32,000.
4. Goods shipped from Kwok to a customer f.o.b. destination on December 26, 2021, were received by the customer on December 30, 2021. The sales price was $30,000 and the merchandise cost $23,000.
5. Goods shipped from Kwok to a customer f.o.b. shipping point on December 28, 2021, were received by the customer on January 4, 2022. The sales price was $35,000 and the merchandise cost $22,000.

Required:
Determine the correct inventory amount to be reported in Kwok’s 2021 balance sheet.

Answer 1

Answer:

$274,000

Explanation:

As per the data given in the question,

Particulars                                                                                     Amount

Inventory balance before considering following items         $215,000

Adjustments:

1) According to FOB destination, ownership passes to buyer at receipt of goods $-

2) According to FOB shipping point, ownership passes to buyer at the point of shipment                                                                                     $27,000

3) According to FOB destination, ownership passes to buyer at receipt of goods                                                  

                                                                                                    $32,000

4) As goods received before period close, no adjustment is required $-

5) According to FOB shipment, ownership passes to buyer at receipt of shipment $-

Correct inventory amount to be reported in Kwok's 2021 balance sheet  

= ( $215,000 + $27,000 + $32,000) =  $274,000