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In: Accounting

The Mateo Corporation's inventory at December 31, 2020, was $325,000 based on a physical count priced...

The Mateo Corporation's inventory at December 31, 2020, was $325,000 based on a physical count priced at cost, and before any necessary adjustment for the following:

  1. Merchandise costing $30,000, shipped F.o.b. shipping point from a vendor on December 30, 2020, was received on January 5, 2021.
  2. Merchandise costing $22,000, shipped F.o.b. destination from a vendor on December 28, 2020, was received on January 3, 2021.
  3. Merchandise costing $38,000 was shipped to a customer F.o.b. destination on December 28, 2020, arrived at the customer's location on January 6, 2021.
  4. Merchandise costing $12,000 was being held on consignment by Traynor Company.

What amount should Mateo Corporation report as inventory in its December 31, 2020, balance sheet? (Show your reasoning!)

Solutions

Expert Solution

Answer :-

Particular Amount
Inventory at December 31, 2020 $325,000
Add :-

Merchandise Inventory shipped F.o.b. shipping point from a vendor on December 30, 2020

(When goods purchased F.O.B shipping point it clearly mean that ownership of goods transfer to buyer when goods shipped. So it will include in ending inventory)

 $30,000

Merchandise Inventory was shipped to a customer F.o.b. destination

(As good was sold to customer on F.O.B destination it means the ownership of goods was transferred to buyer when goods reached to buyer location. Here good reached to buyer on January 6, 2021.So it would also included in Mateo inventory)

 $38,000

Merchandise Inventory was being held on consignment by Traynor Company.

(Here Inventory sold on consignment to Traynor company it means that ownership will remain to Mateo as he is consignor of Inventory)

 $12,000
Mateo Corporation report as inventory in its December 31, 2020 $405,000

Note :- we only not include the Merchandise costing $22,000, shipped F.o.b. destination from a vendor on December 28, 2020, was received on January 3, 2021.

As these Inventory was purchased on F.O.B destination which mean when this goods received by Mateo Corporation then the ownership of goods transfer to Mateo and Inventory was received on January 3,2021. Therefore, it will not included.

ekkarill92 answered 2 years ago
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