Transfer of Title Jensen Tire had two large shipments in transit at December 31.
ID: 2247286 • Letter: T
Question
Transfer of Title
Jensen Tire had two large shipments in transit at December 31. One was a $130,000 inbound shipment of merchandise (shipped December 28, F.O.B. shipping point), which arrived at Jensen’s receiving dock on January 2. The other shipment was a $95,000 outbound shipment of merchandise to a customer, which was shipped and billed by Jensen on December 30 (terms F.O.B. shipping point) and reached the customer on January 3.
In taking a physical inventory on December 31, Jensen counted all goods on hand and priced the inventory on the basis of average cost. The total inventory amount was $600,000. No goods in transit were included in this figure.
What amount should appear as inventory on the company’s balance sheet at December 31? Explain. If you indicate an amount other than $600,000, state which asset or liability other than inventory also would be changed in amount, assuming that all inventory purchases are made on credit.
Explanation / Answer
the inventory at december 31st amounts to 725,000, computed by adding the 125,000 inbound shipment of merchandise to 600,000 of merchandise on hand. terms of the 125,000 shipment were F.O.B shipping point;the point of shipment on december 28 and the goods were property of the buyer
in transit;
the 95,000 shipment was correctly handled the customer on december 30 when the goods were shipped at dec 31st this shipment was billed account receivable is properly included the balance sheet
on addition to the 125,000 increases in inventory it should be increased by 125,000.
the jensen owns the merchandies at dec 31st has a liability to pay for it
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