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Whispering Winds Corp. took a physical inventory on December 31 and determined that goods costing $213,000 were on hand. Not included in the physical count were $35,000 of goods purchased from Coronado Industries, FOB, shipping point, and $26,500 of goods sold to Sunland Company for $31,000, FOB destination. Both the Coronado purchase and the Sunland sale were in transit at year-end.
Required:
1. What amount should Whispering Winds report as its December 31 inventory?

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akiran007

Answer:

Whispering Winds  December 31 inventory  $ 274,500        

Explanation:

FOB shipping point means free on board shipping point. It gives the buyer the ownership of the goods purchased once they are shipped. These in transit are under the buyer's ownership.

FOB destination means that the buyers get the ownership when the goods reach the destination point.These in transit are not under in the buyer's ownership.

Goods costing on hand   $213,000

Add Goods purchased  FOB, shipping point $ 35000

Add Goods sold to Sunland Company FOB destination $ 26,500

Whispering Winds  December 31 inventory  $ 274,500        

Both purchased and sold are under the  Whispering Winds Corp. inventory as they sold ones have not reached the destination and purchased have left the shipping point.

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