Assume that the total inventory counted at the end of the year was $75,000. Excluded from the count were purchases of $5,000 in transit under FOB destination terms. What is the cost of inventory reported on the balance sheet?

Question

Quizplus · Accepted Answer

Under FOB destination terms, the ownership of the goods transfers from the seller to the buyer when the goods arrive at the buyer's location. Therefore, the $5,000 of purchases in transit should not be included in the buyer's inventory until received. The correct inventory value is the amount actually counted, $75,000.

Assume That the Total Inventory Counted at the End of the Year