Question

Waterway Inc. took a physical inventory at the end of the year and determined that $832000 of goods were on hand. In addition, the following items were not included in the physical count. Waterway, Inc. determined that $96000 of goods purchased were in transit that were shipped f.o.b. destination (goods were actually received by the company three days after the inventory count).The company sold $39500 worth of inventory f.o.b. destination.
What amount should Waterway report as inventory at the end of the year?

Answer 1

Answer:

$888,500

Explanation:

F.O.B Destination(freight on board) means that ownership is transferred to the buyer as soon as buyers acknowledge receipt of the goods.

Since the goods arrived 3 days after inventory count, the cost of transit goods should be added up as follows:

$832,000 + $96,000 - $39500 = $888,500