Brief Exercise 83 Culver Company took a physical inventory o

Brief Exercise 8-3

Culver Company took a physical inventory on December 31 and determined that goods costing $203,600 were on hand. Not included in the physical count were $25,420 of goods purchased from Pelzer Corporation, f.o.b. shipping point, and $22,520 of goods sold to Alvarez Company for $32,230, f.o.b. destination. Both the Pelzer purchase and the Alvarez sale were in transit at year-end. What amount should Culver report as its December 31 inventory?

Solution

December 31 inventory = $251,540

(203600+25420+22520)

FOB shipping point - Ownership gets transferred once goods are shipped (hence included in inventory calculation)

FOB destination - Ownership gets transferred once goods are received by the other party (hence cost of such transaction added)