For Each of the Following, Calculate the Cost of Inventory

question 186

Essay

For each of the following, calculate the cost of inventory reported on the balance sheet.
a The total merchandise inventory counted at the end of the year was $63,000. Purchases for
$6,000 are in transit under FOB shipping point terms.
b The total merchandise inventory counted at the end of the year was $75,000. Purchases for $5,000 are in transit under FOB destination terms.

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Definitions:

Accounting Staff

Individuals responsible for managing financial records, transactions, and reporting within an organization.

Internet Access

Internet access denotes the ability of individuals or organizations to connect to the internet using computers, smartphones, or other devices.

Moral Hazard

The risk that a party insulated from risk may behave differently than if they were fully exposed to the risk.

Adverse Selection

A situation where asymmetric information results in high-risk individuals being more likely to participate in an agreement or purchase, negatively affecting the seller or insurer.