Fyodorov Company, Using a Periodic Inventory System, Has Just Completed

question 126

Essay

Fyodorov Company, using a periodic inventory system, has just completed a physical inventory count at year end, December 31, 2015. Only the items on the shelves, in storage, and in the receiving area were counted. The inventory amounted to $60,000. During the audit, the independent CGA discovered the following additional information:
1. There were goods in transit on December 31, 2015, from a supplier with terms FOB destination, costing $8,000. Because the goods had not arrived, they were excluded from the physical inventory count.
2. On December 27, 2015, a regular customer purchased goods for cash amounting to $1,000 and left them for pickup on January 4, 2016. Fyodorov Company had paid $500 for the goods and, because they were on hand, included them in the physical inventory count.
3. Fyodorov Company, on the date of the inventory count, received notice from a supplier that goods ordered earlier, at a cost of $4,000, had been delivered to the transportation company on December 28, 2015; the terms were FOB shipping point. Because the shipment had not arrived on December 31, 2015, it was excluded from the physical inventory.
4. On December 31, 2015, there were goods in transit to customers, with terms FOB shipping point, amounting to $800 (expected delivery on January 8, 2016). Because the goods had been shipped, they were excluded from the physical inventory count.
5. On December 31, 2015, Fyodorov Company shipped $2,500 worth of goods to a customer, FOB destination, in Thunder Bay. The goods arrived in Thunder Bay on January 5, 2016. Because the goods were not on hand, they were not included in the physical inventory count.
6. Fyodorov Company, as the consignee, had goods on consignment that cost $8,000. Because these goods were on hand as of December 31, 2015, they were included in the physical inventory count.
Instructions
Analyze the above information for Fyodorov Company and calculate a corrected amount for the ending inventory. Explain the basis for your treatment of each item.

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Definitions:

Post-Decisional Justification

The cognitive process where individuals convince themselves that the choice they made was the best possible option, often to reduce dissonance after making a difficult decision.

Limitations

Restrictions or constraints that define the boundaries within which a process or activity can occur.

Optimism

A mental attitude characterized by hope and confidence in success and positive outcomes.

Satisficing

A decision-making strategy that aims for a satisfactory or adequate solution rather than the optimal one.