2. Shell Company determined its December 31, 2017 inventory to be $1,000,000 bas
ID: 2341289 • Letter: 2
Question
2. Shell Company determined its December 31, 2017 inventory to be $1,000,000 based on a physical count priced at cost. It then determined the following additional information:
Merchandise costing $90,000, was shipped FOB shipping point from a vendor on December 30, 2017. This merchandise was received and recorded on January 5, 2018.
Customer goods costing $120,000 were staged on Shell’s shipping dock and excluded from inventory although shipment was not made until January 4, 2018. The goods were billed to the customer FOB shipping point on December 30, 2017.
What is Shell’s ending inventory for its December 31, 2017, balance sheet?
a.
$1,000,000
b.
$1,090,000
c.
$1,120,000
d.
$1,210,000
a.
$1,000,000
b.
$1,090,000
c.
$1,120,000
d.
$1,210,000
Explanation / Answer
In the case of FOB shipping point, the title of goods passes from the seller to the buyer when the goods are delivered by seller to the common carrier.
Merchandise costing $90,000 has to be included in ending inventory as the goods were shipped on December 30.
Customer goods costing $120,000 has to be included in ending inventory as the shipping was not made until January 4, 2018
Shell’s ending inventory for its December 31, 2017, balance sheet = $1,000,000 + $90,000 + $120,000
= $1,210,000
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