As a result of a thorough physical inventory, Horace Company determined that it had inventory worth $320,000 at December 31, 2018. This count did not take into consideration the following facts: Herschel Consignment currently has goods worth $47,000 on its sales floor that belong to Horace but are being sold on consignment by Herschel. The selling price of these goods is $75,000. Horace purchased $22,000 of goods that were shipped on December 27, FOB destination, that will be received by Horace on January 3. Determine the correct amount of inventory that Horace should report.

Question

Quizplus · Accepted Answer

The correct amount of inventory that Horace should report is found by taking the physical inventory count of $320,000 and adding back the consignment goods that belong to Horace but are being sold through Herschel. These goods are worth $47,000 and were not counted in the physical inventory. Therefore, the correct inventory balance is $320,000 + $47,000 = $367,000.

The goods that were shipped on December 27 and will be received on January 3 should not be included in the December 31 inventory balance because the goods were not in the company's possession at year-end.

As a Result of a Thorough Physical Inventory, Horace Company