Test: Test 2 Chapters 4-7 n 36 of 40 35 O counted its ending inventory as s Irwi

Question

Test: Test 2 Chapters 4-7 n 36 of 40 35 O counted its ending inventory as s Irwin Company transit during the count Goods totaling $2.000 shipped by the supplier FOB destination on January 31 were received February Sth and were -Goods totaling ss.0oo shipped by the supplier FOB shipping point on January 3o were received February and and were not coun Goods totaling $6,00o shipped by Irwin Company to a customer FO B shipping point on January 31 were received by the eustomer on February grd and were counted 39.. by Irwin Company. What is Irwin Company's.correct inventory balance on January 31, 20x3? O a S172000 b.$177,000 O e $178,000 O d $174,000 1226 AM 44 3/11/2018 Type here to search F8 F10 F11 112

Explanation / Answer

Answer : b.177,000

Explanation:

Goods sold F.O.B. destination do not belong to the purchaser until they arrive at their final destination. Goods sold F.O.B. shipping point become property of the purchaser once shipped by the seller. Therefore, when determining the amount of inventory owned at year end, goods in transit must be considered in light of the F.O.B. terms. In the case of F.O.B. shipping point, for instance, a buyer would need to include as inventory the goods that are being transported but not yet received.

Ending inventory 178,000 Add. Purchases FOB Shipping Point 5,000 Less: Sales - FOB Shipping Point -6,000 Correct inventory balance 177,000

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