Waterway Industries just took its physical inventory on December 31. The count o

Question

Waterway Industries just took its physical inventory on December 31. The count of inventory items on hand at the company’s business locations resulted in a total inventory cost of $282,300. In reviewing the details of the count and related inventory transactions, you have discovered the following items that had not been considered.

Compute the correct December 31 inventory.

1. Waterway Industries has sent inventory costing $25,210 on consignment to Richfield Company. All of this inventory was at Richfield’s showrooms on December 31. 2. The company did not include in the count inventory (cost, $19,380) that was sold on December 28, terms FOB shipping point. The goods were in transit on December 31. 3. The company did not include in the count inventory (cost, $12,360) that was purchased with terms of FOB shipping point. The goods were in transit on December 31.

Explanation / Answer

Solution: Correct December 31 inventory = $319,870 Working Notes: Total inventory count $282,300 a Inventory sent on consignment basis $25,210 Note 1 b Sold on December 28, terms of FOB N/A Note 2 c Purchased with terms of FOB 12,360 Note 3 d=a+b+c Correct December 31 inventory $319,870 Notes: 1. Inventory sent on consignment basis is included in inventory as the ownership of the inventory is still in Waterway Industries the consigner of the inventory. 2. Sold on December 28, terms of FOB the ownership and liabilities of Waterway industries ended on December 28 when the goods are loaded to the shipments hence not included to its inventory 3. Purchased with terms of FOB , the ownership and liabilities of Waterway industries started on date of purchase when the goods are loaded to the shipments hence included to its inventory

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