Street Bank is considering giving Fallen Company a loan. Before doing so, it decides that further discussions with Fallen's accountant may be desirable. One area of particular concern is the inventory account, which has a year-end balance of $375,000. Discussions with the accountant reveal the following. 1. Fallen sold goods costing $55,000 to White Company FOB shipping point on December 28. The goods are not expected to reach White until January 12. The goods were not included in the physical inventory because they were not in the warehouse. 2. The physical count of the inventory did not include goods costing $95,000 that were shipped to Fallen FOB destination on December 27 and were still in transit at year-end. 3. Fallen received goods costing $15,000 on January 2. The goods were shipped FOB shipping point on December 26 by Lynch Co. The goods were not included in the physical count. 4. Fallen sold goods costing $41,000 to Benet of Canada FOB destination on December 30. The goods were received in Canada on January 8. They were not included in Fallen's physical inventory. 5. Fallen received goods costing $32,000 on January 2 that were shipped FOB destination on December 29. The shipment was a rush order that was supposed to arrive December 31. This purchase was included in the ending inventory of $375,000. Instructions
Street Bank is considering giving Fallen Company a loan. Before doing so, it decides that further discussions with Fallen's accountant may be desirable. One area of particular concern is the inventory account, which has a year-end balance of $375,000. Discussions with the accountant reveal the following. 1. Fallen sold goods costing $55,000 to White Company FOB shipping point on December 28. The goods are not expected to reach White until January 12. The goods were not included in the physical inventory because they were not in the warehouse. 2. The physical count of the inventory did not include goods costing $95,000 that were shipped to Fallen FOB destination on December 27 and were still in transit at year-end. 3. Fallen received goods costing $15,000 on January 2. The goods were shipped FOB shipping point on December 26 by Lynch Co. The goods were not included in the physical count. 4. Fallen sold goods costing $41,000 to Benet of Canada FOB destination on December 30. The goods were received in Canada on January 8. They were not included in Fallen's physical inventory. 5. Fallen received goods costing $32,000 on January 2 that were shipped FOB destination on December 29. The shipment was a rush order that was supposed to arrive December 31. This purchase was included in the ending inventory of $375,000. Instructions
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Street Bank is considering giving Fallen Company a loan. Before doing so, it decides that further discussions with
Fallen's accountant may be desirable. One area of particular concern is the inventory account, which has a year-end
balance of $375,000. Discussions with the accountant reveal the following.
1.
Fallen sold goods costing $55,000 to White Company FOB shipping point on December 28. The goods are not
expected to reach White until January 12. The goods were not included in the physical inventory because they
were not in the warehouse.
2.
The physical count of the inventory did not include goods costing $95,000 that were shipped to Fallen FOB
destination on December 27 and were still in transit at year-end.
3.
Fallen received goods costing $15,000 on January 2. The goods were shipped FOB shipping point on December
26 by Lynch Co. The goods were not included in the physical count.
4.
Fallen sold goods costing $41,000 to Benet of Canada FOB destination on December 30. The goods were
received in Canada on January 8. They were not included in Fallen's physical inventory.
5.
Fallen received goods costing $32,000 on January 2 that were shipped FOB destination on December 29. The
shipment was a rush order that was supposed to arrive December 31. This purchase was included in the ending
inventory of $375,000.
Instructions
Determine the correct inventory amount on December 31.
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