Question

In: Accounting

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, 2013, were received by the customer on January 3, 2014. The sales price was $45,000 and the merchandise cost $27,000.
4.

Goods shipped from Kwok to a customer f.o.b. destination on December 26, 2013, were received by the customer on December 30, 2013. The sales price was $25,000 and the merchandise cost $18,000.
5.

Goods shipped from Kwok to a customer f.o.b. shipping point on December 28, 2013, were received by the customer on January 4, 2014. The sales price was $30,000 and the merchandise cost $17,000.
Required:
Determine the correct inventory amount to be reported in Kwok's 2013 balance sheet.

Solutions

Expert Solution

Solution:-

Statement showing correct inventory value
Particulars Amount
Inventory balance before additional transactions $ 190,000
Add:
Goods shipped F.O.B. shipping point, 12/28 22,000
Goods shipped F.O.B. destination, 12/27 27,000
Correct inventory balance $ 239,000

Explanation:-

Sr. No. Explanation
1 Goods of $35,000 shipped to Kwok F.O.B. destination that were received on January 4, 2014 should be excluded from 2013 inventory.
2 Goods of $22,000 shipped to Kwok F.O.B. shipping point on December 28, 2013 should be included in the 2013 inventory.  The date the inventory was received by Kwok is irrelevant
3 Goods of $27,000 shipped from Kwok to a customer F.O.B. destination on December 27, 2013 and received by customer on January 3, 2014 should be included in the 2013 inventory.
4 Goods of $18,000 shipped from Kwok to a customer F.O.B. destination on December 26, 2013 and received by customer on December 30, 2013 should be excluded from the 2013 inventory.
5 Goods of $17,000 shipped from Kwok to a customer F.O.B. shipping point on December 28, 2013 should be excluded from the 2013 inventory.  The date received by the customer is irrelevant.

Please Rate or comment if you have any doubt regarding this solution.

ekkarill92 answered 1 year ago
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