First Bank is considering giving Cullumber Company a loan. First, however, it decides that it would be a good idea to have further discussions with Cullumber’s accountant. One area of particular concern is the inventory account, which has a December 31 balance of $280,000. Discussions with the accountant reveal the following: 1. The physical count of the inventory did not include goods that cost $91,000 that were shipped to Cullumber, FOB shipping point, on December 27 and were still in transit at year end. 2. Cullumber sold goods that cost $37,000 to Oriole, FOB destination, on December 28. The goods are not expected to arrive at their destination in India until January 12. The goods were not included in the physical inventory because they were not in the warehouse. 3. On December 31, Indigo had $32,000 of goods held on consignment for Cullumber. The goods were not included in Cullumber’s ending inventory balance. 4. Cullumber received goods that cost $28,500 on January 2. The goods were shipped FOB shipping point on December 26 by Bramble. The goods were not included in the physical count. Determine the correct inventory amount at December 31. The correct cost of inventory is: Ending inventory—physical count $enter a dollar amount Adjustments: Add to inventory: 1. Title passed to Cullumber when goods were shipped enter a dollar amount 2. Title remains with Cullumber until buyer receives goods enter a dollar amount 3. Consignor (Cullumber) owns goods enter a dollar amount 4. Title passed to Cullumber when goods were shipped enter a dollar amount $enter a dollar amount

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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First Bank is considering giving Cullumber Company a loan. First, however, it decides that it would be a good idea to have further discussions with Cullumber’s accountant. One area of particular concern is the inventory account, which has a December 31 balance of $280,000. Discussions with the accountant reveal the following:

1.		The physical count of the inventory did not include goods that cost $91,000 that were shipped to Cullumber, FOB shipping point, on December 27 and were still in transit at year end.
2.		Cullumber sold goods that cost $37,000 to Oriole, FOB destination, on December 28. The goods are not expected to arrive at their destination in India until January 12. The goods were not included in the physical inventory because they were not in the warehouse.
3.		On December 31, Indigo had $32,000 of goods held on consignment for Cullumber. The goods were not included in Cullumber’s ending inventory balance.
4.		Cullumber received goods that cost $28,500 on January 2. The goods were shipped FOB shipping point on December 26 by Bramble. The goods were not included in the physical count.

Determine the correct inventory amount at December 31.

The correct cost of inventory is:
Ending inventory—physical count		$enter a dollar amount
Adjustments:
Add to inventory:
1. Title passed to Cullumber when goods were shipped		enter a dollar amount
2. Title remains with Cullumber until buyer receives goods		enter a dollar amount
3. Consignor (Cullumber) owns goods		enter a dollar amount
4. Title passed to Cullumber when goods were shipped		enter a dollar amount
		$enter a dollar amount

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