Listed below are some items of inventory for a company at May 31,2001.A substantial portion of the merchandise is stored in a separate warehouse and the company transfers damaged goods to a special inventory account.The company policy is "satisfied customers." $\begin{array} {| l|l| l| }
\hline(1)& \text { Items counted in warehouse, May 31, 2001}&\$70,000\
\hline(2)& \text { Items shipped today*, $ \mathrm{FOB} $ destination, invoice maled to customer}&70\
\hline(3)& \text {Invoice received for goods ordered, FOB destination, goods not yet received. }&800\
\hline(4)& \text { Items shipped today*. FOB shipping point, invoice mailed to customer}&400\\hline
\end{array}$
*Shipped after the count in (1) was made. The correct inventory to be shown on the May 31,2001 balance sheet would be:
A)$69,600
B)$70,000
C)$70,070
D)$70,470

Question

Listed below are some items of inventory for a company at May 31,2001.A substantial portion of the merchandise is stored in a separate warehouse and the company transfers damaged goods to a special inventory account.The company policy is "satisfied customers." $\begin{array} {| l|l| l| } 
\hline(1)& \text { Items counted in warehouse, May 31, 2001}&\$70,000\
\hline(2)& \text { Items shipped today*, $ \mathrm{FOB} $ destination, invoice maled to customer}&70\
\hline(3)& \text {Invoice received for goods ordered, FOB destination, goods not yet received. }&800\
\hline(4)& \text { Items shipped today*. FOB shipping point, invoice mailed to customer}&400\\hline
\end{array}$
 *Shipped after the count in (1) was made. The correct inventory to be shown on the May 31,2001 balance sheet would be:
A)$69,600
B)$70,000
C)$70,070
D)$70,470

Quizplus · Accepted Answer

The correct inventory to be shown on the May 31, 2001 balance sheet is $69,600. This is because the company has a policy of "satisfied customers," which means that they will not record revenue until the customer is satisfied with the product. In this case, the items in (2) have been shipped but the invoice has not been mailed to the customer, so the revenue has not been recorded. The items in (3) have not been received, so they should not be included in inventory. The items in (4) have been shipped and the invoice has been mailed to the customer, so they should be included in inventory.

Listed Below Are Some Items of Inventory for a Company