. A company makes all of its purchases and sales using FOB shipping point. At th

Question

. A company makes all of its purchases and sales using FOB shipping point. At the end of the year, the company had the following two transactions that were correctly recorded: < Purchases. Inventory costing $40,000 is shipped by the seller on December 28 and received by the company on January 4. < Sales. Inventory costing $30,000 is sold to a customer for $48,000. It is shipped on December 28 to the customer and arrives on January 4. If this company had chosen to make these transactions FOB destination rather than FOB shipping point, how would that decision have impacted the reported amount of inventory on the year-end balance sheet? a. Reported inventory would have been $10,000 higher. b. Reported inventory would have been $10,000 lower. c. Reported inventory would have been $40,000 higher. d. Reported inventory would have been $40,000 lower.

Explanation / Answer

Reported inventory would have been $10,000(40000-30000) lower. Option B is correct

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