Question

In: Accounting

The Kwok Company’s inventory balance on December 31, 2021, was $245,000 (based on a 12/31/2021 physical...

The Kwok Company’s inventory balance on December 31, 2021, was $245,000 (based on a 12/31/2021 physical count) before considering the following transactions:

  1. Goods shipped to Kwok f.o.b. destination on December 20, 2021, were received on January 4, 2022. The invoice cost was $46,000.
  2. Goods shipped to Kwok f.o.b. shipping point on December 28, 2021, were received on January 5, 2022. The invoice cost was $33,000.
  3. Goods shipped from Kwok to a customer f.o.b. destination on December 27, 2021, were received by the customer on January 3, 2022. The sales price was $56,000 and the merchandise cost $38,000.
  4. Goods shipped from Kwok to a customer f.o.b. destination on December 26, 2021, were received by the customer on December 30, 2021. The sales price was $36,000 and the merchandise cost $29,000.
  5. Goods shipped from Kwok to a customer f.o.b. shipping point on December 28, 2021, were received by the customer on January 4, 2022. The sales price was $41,000 and the merchandise cost $28,000.


Required:
Determine the correct inventory amount to be reported in Kwok’s 2021 balance sheet.

Solutions

Expert Solution

Answer :-

First we discussed the F.O.B destination and F.O.B Shipping point.

F.O.B. destination :- It means when goods reached to buyer location then only ownership of goods transferred from vendor to buyer. Here ,the vendor have responsibilities to transfer goods to buyer.

F.O.B Shipping point :- It means that when goods shipped from vendor then only ownership is transferred to buyer.

Now we calculate the  the correct inventory amount to be reported in Kwok’s 2021 balance sheet.

Particular Amount
Inventory balance on December 31, 2021 $245,000
Add :-
Good shipped to Kwok on F.O.B Shipping point $33,000
Good shipped from Kwok on F.O.B destination $38,000
Correct inventory amount to be reported in Kwok’s 2021 balance sheet. $316,000

Explanation :-

1) Goods shipped to Kwok f.o.b. destination on December 20, 2021, were received on January 4, 2022. The invoice cost was $46,000.

In will not included in Inventory as on December 31,2021 as Goods shipped to kwok on F.O.B destination it mean ownership will transfer to Kwok company when it receives.

2) Goods shipped to Kwok f.o.b. shipping point on December 28, 2021, were received on January 5, 2022. The invoice cost was $33,000.

It will included in Inventory as on December 31,2021 as Goods shipped to kwok on F.O.B shipping point it mean ownership will transfer to Kwok company when it shipped from vendor location.

3) Goods shipped from Kwok to a customer f.o.b. destination on December 27, 2021, were received by the customer on January 3, 2022.

It will include in Inventory as on December 31,2021 as Goods shipped from kwok on F.O.B destination it mean ownership will remain to Kwok company. As good received by customer on January 3,2020. And we include in inventory on merchandise cost.

4)Goods shipped from Kwok to a customer f.o.b. destination on December 26, 2021, were received by the customer on December 30, 2021.

In will not included in Inventory as on December 31,2021 as Good shipped from Kwok and reached to customer before year end.

5)Goods shipped from Kwok to a customer f.o.b. shipping point on December 28, 2021

It will not included in Inventory as it shipped on F.O.B Shipping point it mean at the time of shipped of goods ownership will transfer to customer.


Related Solutions

The Kwok Company’s inventory balance on December 31, 2016, was $165,000 (based on a 12/31/16 physical...
The Kwok Company’s inventory balance on December 31, 2016, was $165,000 (based on a 12/31/16 physical count) before considering the following transactions: 1. Goods shipped to Kwok f.o.b. destination on December 20, 2016, were received on January 4, 2017. The invoice cost was $30,000. 2. Goods shipped to Kwok f.o.b. shipping point on December 28, 2016, were received on January 5, 2017. The invoice cost was $17,000. 3. Goods shipped from Kwok to a customer f.o.b. destination on December 27,...
The Kwok Company's inventory balance on December 31, 2013, was $190,000 (based on a 12/31/13 physical...
The Kwok Company's inventory balance on December 31, 2013, was $190,000 (based on a 12/31/13 physical count) before considering the following transactions: 1. Goods shipped to Kwok f.o.b. destination on December 20, 2013, were received on January 4, 2014. The invoice cost was $35,000. 2. Goods shipped to Kwok f.o.b. shipping point on December 28, 2013, were received on January 5, 2014. The invoice cost was $22,000. 3. Goods shipped from Kwok to a customer f.o.b. destination on December 27,...
The December 31, 2021, inventory of Tog Company, based on a physical count, was determined to...
The December 31, 2021, inventory of Tog Company, based on a physical count, was determined to be $465,000. Included in that count was a shipment of goods received from a supplier at the end of the month that cost $65,000. The purchase was recorded and paid for in 2022. Another supplier shipment costing $27,500 was correctly recorded as a purchase in 2021. However, the merchandise, shipped FOB shipping point, was not received until 2022 and was incorrectly omitted from the...
Royal Corporation’s inventory at December 31, 2021, was $126,000 (at cost) based on a physical count...
Royal Corporation’s inventory at December 31, 2021, was $126,000 (at cost) based on a physical count of inventory on hand, before any necessary adjustment for the following: Merchandise costing $16,000, shipped f.o.b. shipping point from a vendor on December 27, 2021, was received by Royal on January 5, 2022. Merchandise costing $46,000 was shipped to a customer f.o.b. shipping point on December 28, 2021, arrived at the customer’s location on January 6, 2022. Merchandise costing $22,000 was being held on...
Grass Company’s inventory at December 31, 2021 was P570,000 based on a physical count of goods priced at cost and before any necessary year-end adjustments relating to the following:
Grass Company’s inventory at December 31, 2021 was P570,000 based on a physical count of goods priced at cost and before any necessary year-end adjustments relating to the following: • Included in the physical count were goods billed to a customer FOB shipping point on December 31, 2p016. These goods had a cost of P15,000 and were picked up by a carrier on January 10, 2022. • Goods shipped FOB shipping point on December 28, 2021 from a vendor to...
Oriole Company’s balance sheet at December 31, 2021, is presented below. Oriole Company Balance Sheet December...
Oriole Company’s balance sheet at December 31, 2021, is presented below. Oriole Company Balance Sheet December 31, 2021 Cash $13,680 Accounts payable $8,900 Accounts receivable 21,100 Common stock 21,800 Allowance for doubtful accounts (740) Retained earnings 13,330 Inventory 9,990 $44,030 $44,030 During January 2022, the following transactions occurred. Oriole uses the perpetual inventory method. Jan. 1 Oriole accepted a 4-month, 8% note from Betheny Company in payment of Betheny’s $4,800 account. 3 Oriole wrote off as uncollectible the accounts of...
Oriole Company’s balance sheet at December 31, 2021, is presented below. Oriole Company Balance Sheet December...
Oriole Company’s balance sheet at December 31, 2021, is presented below. Oriole Company Balance Sheet December 31, 2021 Cash $13,680 Accounts payable $8,900 Accounts receivable 21,100 Common stock 21,800 Allowance for doubtful accounts (740) Retained earnings 13,330 Inventory 9,990 $44,030 $44,030 During January 2022, the following transactions occurred. Oriole uses the perpetual inventory method. Jan. 1 Oriole accepted a 4-month, 8% note from Betheny Company in payment of Betheny’s $4,800 account. 3 Oriole wrote off as uncollectible the accounts of...
Sheridan Company’s balance sheet at December 31, 2021, is presented below. Sheridan Company Balance Sheet December...
Sheridan Company’s balance sheet at December 31, 2021, is presented below. Sheridan Company Balance Sheet December 31, 2021 Cash $13,500 Accounts payable $8,300 Accounts receivable 20,600 Common stock 21,900 Allowance for doubtful accounts (860) Retained earnings 12,710 Inventory 9,670 $42,910 $42,910 During January 2022, the following transactions occurred. Sheridan uses the perpetual inventory method. Jan. 1 Sheridan accepted a 4-month, 8% note from Betheny Company in payment of Betheny’s $3,600 account. 3 Sheridan wrote off as uncollectible the accounts of...
Sheridan Company’s balance sheet at December 31, 2021, is presented below. Sheridan Company Balance Sheet December...
Sheridan Company’s balance sheet at December 31, 2021, is presented below. Sheridan Company Balance Sheet December 31, 2021 Cash $13,500 Accounts payable $8,300 Accounts receivable 20,600 Common stock 21,900 Allowance for doubtful accounts (860) Retained earnings 12,710 Inventory 9,670 $42,910 $42,910 During January 2022, the following transactions occurred. Sheridan uses the perpetual inventory method. Jan. 1 Sheridan accepted a 4-month, 8% note from Betheny Company in payment of Betheny’s $3,600 account. 3 Sheridan wrote off as uncollectible the accounts of...
The December 31, 2018, inventory of Tog Company, based on a physical count, was determined to...
The December 31, 2018, inventory of Tog Company, based on a physical count, was determined to be $460,000. Included in that count was a shipment of goods received from a supplier at the end of the month that cost $60,000. The purchase was recorded and paid for in 2019. Another supplier shipment costing $25,000 was correctly recorded as a purchase in 2018. However, the merchandise, shipped FOB shipping point, was not received until 2019 and was incorrectly omitted from the...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT