Based on its physical count of inventory in its warehouse at year-end, December 31 of the current year, Plummer Company planned to report inventory of $35,400. During the audit, the independent CPA developed the following additional information: a. Goods from a supplier costing $710 are in transit with UPS on December 31 of the current year. The terms are FOB shipping point (explained in the "Required" section). Because these goods had not yet arrived, they were excluded from the physical inventory count. b. Plummer delivered samples costing $1,730 to a customer on December 27 of the current year, with the understanding that they would be returned to Plummer on January 15 of the next year. Because these goods were not on hand, they were excluded from the inventory count. c. On December 31 of the current year, goods in transit to customers, with terms FOB shipping point, amounted to $6,000 (expected delivery date January 10 of the next year). Because the goods had been shipped, they were excluded from the physical inventory count. d. On December 31 of the current year, goods in transit to customers, with terms FOB destination, amounted to $3,000 (expected delivery date January 10 of the next year). Because the goods had been shipped, they were excluded from the physical inventory count. Required: Plummer's accounting policy requires including in inventory all goods for which it has title. Note that the point where title (ownership) changes hands is determined by the shipping terms in the sales contract. When goods are shipped "FOB shipping point," title changes hands at shipment and the buyer normally pays for shipping. When they are shipped "FOB destination," title changes hands on delivery, and the seller normally pays for shipping. Compute the correct amount for the ending inventory. Note: If no adjustment is necessary, enter a $0 in the cell.
Based on its physical count of inventory in its warehouse at year-end, December 31 of the current year, Plummer Company planned to report inventory of $35,400. During the audit, the independent CPA developed the following additional information: a. Goods from a supplier costing $710 are in transit with UPS on December 31 of the current year. The terms are FOB shipping point (explained in the "Required" section). Because these goods had not yet arrived, they were excluded from the physical inventory count. b. Plummer delivered samples costing $1,730 to a customer on December 27 of the current year, with the understanding that they would be returned to Plummer on January 15 of the next year. Because these goods were not on hand, they were excluded from the inventory count. c. On December 31 of the current year, goods in transit to customers, with terms FOB shipping point, amounted to $6,000 (expected delivery date January 10 of the next year). Because the goods had been shipped, they were excluded from the physical inventory count. d. On December 31 of the current year, goods in transit to customers, with terms FOB destination, amounted to $3,000 (expected delivery date January 10 of the next year). Because the goods had been shipped, they were excluded from the physical inventory count. Required: Plummer's accounting policy requires including in inventory all goods for which it has title. Note that the point where title (ownership) changes hands is determined by the shipping terms in the sales contract. When goods are shipped "FOB shipping point," title changes hands at shipment and the buyer normally pays for shipping. When they are shipped "FOB destination," title changes hands on delivery, and the seller normally pays for shipping. Compute the correct amount for the ending inventory. Note: If no adjustment is necessary, enter a $0 in the cell.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Based on its physical count of inventory in its warehouse at year-end, December 31 of the current year, Plummer Company planned to
report inventory of $35,400. During the audit, the independent CPA developed the following additional information:
a. Goods from a supplier costing $710 are in transit with UPS on December 31 of the current year. The terms are FOB shipping point
(explained in the "Required" section). Because these goods had not yet arrived, they were excluded from the physical inventory
count.
b. Plummer delivered samples costing $1,730 to a customer on December 27 of the current year, with the understanding that they
would be returned to Plummer on January 15 of the next year. Because these goods were not on hand, they were excluded from
the inventory count.
c. On December 31 of the current year, goods in transit to customers, with terms FOB shipping point, amounted to $6,000
(expected delivery date January 10 of the next year). Because the goods had been shipped, they were excluded from the
physical inventory count.
d. On December 31 of the current year, goods in transit to customers, with terms FOB destination, amounted to $3,000 (expected
delivery date January 10 of the next year). Because the goods had been shipped, they were excluded from the physical inventory
count.
Required:
Plummer's accounting policy requires including in inventory all goods for which it has title. Note that the point where title (ownership)
changes hands is determined by the shipping terms in the sales contract. When goods are shipped "FOB shipping point," title changes
hands at shipment and the buyer normally pays for shipping. When they are shipped "FOB destination," title changes hands on
delivery, and the seller normally pays for shipping. Compute the correct amount for the ending inventory.
Note: If no adjustment is necessary, enter a $0 in the cell.
Item
Ending inventory (physical count on December 31 of the current year)
a. Goods purchased and in transit
b. Samples out on trial to customer
c. Goods in transit to customer
d. Goods in transit to customer
Correct inventory, December 31, current year
$
Amount
35,400
35,400
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