At the end of 2018, the Biggie Company performed its annual physical inventory count. John Lawrence, themanager in charge of the physical count, was told that an additional $22,000 in inventory that had been sold andwas in transit to the customer should be included in the ending inventory balance. John was of the opinion that themerchandise shipped should be excluded from the ending inventory since Biggie was not in physical possessionof the merchandise.Required:Discuss the situation and indicate why John’s opinion might be incorrect.
At the end of 2018, the Biggie Company performed its annual physical inventory count. John Lawrence, themanager in charge of the physical count, was told that an additional $22,000 in inventory that had been sold andwas in transit to the customer should be included in the ending inventory balance. John was of the opinion that themerchandise shipped should be excluded from the ending inventory since Biggie was not in physical possessionof the merchandise.Required:Discuss the situation and indicate why John’s opinion might be incorrect.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
At the end of 2018, the Biggie Company performed its annual physical inventory count. John Lawrence, the
manager in charge of the physical count, was told that an additional $22,000 in inventory that had been sold and
was in transit to the customer should be included in the ending inventory balance. John was of the opinion that the
merchandise shipped should be excluded from the ending inventory since Biggie was not in physical possession
of the merchandise.
Required:
Discuss the situation and indicate why John’s opinion might be incorrect.
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