Question

In: Accounting

The December 31, 2018, year-end inventory balance of the Raymond Corporation is $234,000. You have been...

The December 31, 2018, year-end inventory balance of the Raymond Corporation is $234,000. You have been asked to review the following transactions to determine if they have been correctly recorded.

Goods shipped to Raymond f.o.b. destination on December 26, 2018, were received on January 2, 2019. The invoice cost of $42,000 is included in the preliminary inventory balance.

At year-end, Raymond held $26,000 of merchandise on consignment from the Harrison Company. This merchandise is included in the preliminary inventory balance.

On December 29, merchandise costing $7,200 was shipped to a customer f.o.b. shipping point and arrived at the customer’s location on January 3, 2019. The merchandise is not included in the preliminary inventory balance.

At year-end, Raymond had merchandise costing $27,000 on consignment with the Joclyn Corporation. The merchandise is notincluded in the preliminary inventory balance.


Required:
Determine the correct inventory amount to be reported in Raymond’s 2018 balance sheet.

Solutions

Expert Solution

Under FOB shipping point, the title of goods passes from seller to the buyer when the goods are delivered by seller to the common carrier.

Under FOB destination, the title of goods passes from seller to the buyer when the goods are received by the buyer.

Under consignment sales, Consignee holds consignor’s inventory to sell for a commission. The title of goods when sold, passes directly from consignor to the third party.

Goods shipped to Raymond f.o.b. destination on December 26, 2018, were received on January 2, 2019. The invoice cost of $42,000 is included in the preliminary inventory balance.

These goods are to be excluded from the Ending inventory.

At year-end, Raymond held $26,000 of merchandise on consignment from the Harrison Company. This merchandise is included in the preliminary inventory balance.

These goods are to be excluded from the Ending inventory.

On December 29, merchandise costing $7,200 was shipped to a customer f.o.b. shipping point and arrived at the customer’s location on January 3, 2019. The merchandise is not included in the preliminary inventory balance.

The adjustment made is correct.

At year-end, Raymond had merchandise costing $27,000 on consignment with the Joclyn Corporation. The merchandise is not included in the preliminary inventory balance.

The adjustment made is correct.

Determine the correct inventory amount to be reported in Raymond’s 2018 balance sheet.

= $234,000 - $42,000 - $26,000

= $166,000

ekkarill92 answered 2 years ago
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