Question

current attempt in progress tri - state bank and trust is considering giving bramble company a loan. before doing so, management decides that further discussions with bramble’s accountant may be desirable. one area of particular concern is the inventory account, which has a year - end balance of $345,000. discussions with the accountant reveal the following. 1. bramble shipped goods costing $35,000 to lilja company, fob shipping point, on december 28. the goods are not expected to arrive at lilja until january 12. the goods were not included in the physical inventory because they were not in the warehouse. 2. the physical count of the inventory did not include goods costing $90,000 that were shipped to bramble fob destination on december 27 and were still in transit at year - end. 3. bramble received goods costing $21,000 on january 2. the goods were shipped fob shipping point on december 26 by brent co. the goods were not included in the physical count. 4. bramble shipped goods costing $35,000 to jesse co., fob destination, on december 30. the goods were received at jesse on january 8. they were not included in bramble’s physical inventory. 5. bramble received goods costing $42,000 on january 2 that were shipped fob destination on december 29. the shipment was a rush order that was supposed to arrive december 31. this purchase was included in the ending inventory of $345,000. determine the correct inventory amount on december 31. correct inventory $

Explanation:

Step1: Start with unadjusted inventory

$\$345,000$

Step2: Adjust for FOB shipping point shipment

Goods shipped FOB shipping point (Dec 28) belong to the buyer (Lilja) at year-end, so no change.
$\$345,000 + \$0$

Step3: Adjust for in-transit FOB destination

Goods shipped to Bramble FOB destination in transit: ownership stays with seller, so no change.
$\$345,000 + \$0$

Step4: Add FOB shipping point in-transit goods

Goods shipped FOB shipping point (Dec 26) belong to Bramble; add $\$21,000$.
$\$345,000 + \$21,000 = \$366,000$

Step5: Add FOB destination shipped goods

Goods shipped FOB destination (Dec 30) still belong to Bramble; add $\$35,000$.
$\$366,000 + \$35,000 = \$401,000$

Step6: Remove incorrectly included goods

Goods received Jan 2 (FOB destination) not owned by Bramble; subtract $\$42,000$.
$\$401,000 - \$42,000 = \$359,000$

Answer:

$\$359,000$