The Kwok Company’s inventory balance on December 31, 2016, was $265,000 (based o

Question

The Kwok Company’s inventory balance on December 31, 2016, was $265,000 (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 $50,000.

Goods shipped to Kwok f.o.b. shipping point on December 28, 2016, were received on January 5, 2017. The invoice cost was $37,000.

Goods shipped from Kwok to a customer f.o.b. destination on December 27, 2016, were received by the customer on January 3, 2017. The sales price was $60,000 and the merchandise cost $42,000.

Goods shipped from Kwok to a customer f.o.b. destination on December 26, 2016, were received by the customer on December 30, 2016. The sales price was $40,000 and the merchandise cost $33,000.

Goods shipped from Kwok to a customer f.o.b. shipping point on December 28, 2016, were received by the customer on January 4, 2017. The sales price was $45,000 and the merchandise cost $32,000.

1.Goods shipped to Kwok f.o.b. destination on December 20, 2016, were received on January 4, 2017. The invoice cost was $50,000.

Goods shipped to Kwok f.o.b. shipping point on December 28, 2016, were received on January 5, 2017. The invoice cost was $37,000.

Goods shipped from Kwok to a customer f.o.b. destination on December 27, 2016, were received by the customer on January 3, 2017. The sales price was $60,000 and the merchandise cost $42,000.

Goods shipped from Kwok to a customer f.o.b. destination on December 26, 2016, were received by the customer on December 30, 2016. The sales price was $40,000 and the merchandise cost $33,000.

Goods shipped from Kwok to a customer f.o.b. shipping point on December 28, 2016, were received by the customer on January 4, 2017. The sales price was $45,000 and the merchandise cost $32,000.

Explanation / Answer

1. No action needed. The goods only belonged to Kwok on Jan. 4.

2. Goods shipped to Kwok f.o.b. shipping point on December 28 were received on January 5,The invoice cost was $37,000
Add $37,000

3. Goods shipped from Kwok to a customer f.o.b. destination on December 27, were received by the customer on January 3. The sales price was $60,000 and the merchandise cost $42,000
Add $42,000. The goods left Kwok's warehouse on Dec 27, so it could not have been included in the physical count, but it has to be added cos the terms were fob destination. The $60k is irrelevant. Inventory is always stated at cost or market, whichever is the lower.

4. Goods shipped from Kwok to a customer f.o.b. destination on December 26,, were received by the customer on December 30, . The sales price was $40,000 and the merchandise cost $33,000
No action needed. The goods were correctly excluded from inventory.

5. Goods shipped from Kwok to a customer f.o.b. shipping point on December 28, were received by the customer on January 4,. The sales price was $45,000 and the merchandise cost $32,000
No action needed. The goods belonged to the customer on Dec 28, and were correctly excluded from inventory.

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