Asked by Lizbeilyn Ozoria on Jul 09, 2024
Verified
Assume that the total inventory on hand at the end of the year as determined by taking a physical inventory is $62,000. Of the $62,000, $8,000 has been sold FOB destination and is awaiting pickup by the carrier. What is the cost of inventory reported on the balance sheet?
A) $70,000
B) $62,000
C) $58,000
D) $54,000
FOB Destination
A shipping term indicating that the seller is responsible for the goods and the cost of shipping until they are delivered to the buyer's specified location.
Physical Inventory
The process of counting and verifying all the physical goods and merchandise a company has in stock at a particular time.
Cost of Inventory
The total cost incurred to acquire inventory, including purchase price, taxes, and transportation.
- Create the section of the income statement that accounts for the cost of goods sold, in accordance with the periodic inventory system.
Verified Answer
SC
Shaun ConnerJul 09, 2024
Final Answer :
B
Explanation :
The cost of inventory reported on the balance sheet should be $62,000. This is because the $8,000 of inventory sold FOB destination, although sold, is still in the possession of the company and awaiting pickup by the carrier. Therefore, it is still considered part of the company's inventory until it is physically transferred to the buyer.
Learning Objectives
- Create the section of the income statement that accounts for the cost of goods sold, in accordance with the periodic inventory system.