Marigold Inc. took a physical inventory at the end of the year and determined th

Question

Marigold Inc. took a physical inventory at the end of the year and determined that $837000 of goods were on hand. In addition, the following items were not included in the physical count. Marigold, Inc. determined that $95500 of goods purchased were in transit that were shipped f.o.b. destination (goods were actually received by the company three days after the inventory count).The company sold $41000 worth of inventory f.o.b. destination. What amount should Marigold report as inventory at the end of the year?

Explanation / Answer

Valuation of inventory is dependent upon the FOB basis, if FOB is designation then good should be included in inventory when inventory actually received by company. Otherwise when FOB is shipped then as soon as goods shiped , it would be part of inventory.

In the above case FOB is Destination, then inventory in transit cannot be include in valuation of inventory at year ended. Sale of inventory is also not deducted from inventory valuation.

While doing the physical counting sale of inventory is not available Therefore, Inventory value is $837000+$41000. = $878000.

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