On December 31, Powell Company had an ending inventory of $56,900 based primaril

Question

On December 31, Powell Company had an ending inventory of $56,900 based primarily on a physical count at its warehouse. In computing the final balance of Inventory, the following information was available:


(a) Inventory items with a cost of $2,830 were excluded from ending inventory. These goods were on consignment to King Company and had not yet been sold by December 31.



(b) Inventory items with a cost of $3,270 were included in ending inventory. These goods were in transit from Evans Company to Powell Company and were purchased FOB shipping point.



(c) Inventory items with a cost of $3,840 were included in ending inventory. These goods were in transit from Reed Company to Powell Company and were purchased FOB destination.



Required:
Using the information given above, compute the correct final balance of Inventory

I am lost on this question I can't figure out how to determine the ending inventory balance. What do I calculate?

Explanation / Answer

(a) Since $2830 was excluded you should add it back to get the accurate end. inv. Because things on consignment still belong to the company. King Company does not take ownership of it.

(b) Once you purchase via FOB shipping point, you would have ownership of the goods so you just add $3,270 to the end. inv.

(c)Deduct the $3,840. Because when you buy things FOB destination, you don't have ownership of the goods until the goods reach you. In this case, the goods are still in transit, so Reed Company still has ownership of them.

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