Jensen Tire had two large shipments in transit on Dec 31. One was a $130,000 inbound shipment of merchandise (shipped Dec 28 FOB shipping point), which arrived at Jensen’s receiving dock on Jan 2. The other shipment was a $95,000 outbound shipment of merchandise to a customer, which was shipped and billed by Jensen on Dec 30 (terms FOB shipping point) and reached the customer on Jan 3.
In taking physical inventory on Dec 31, Jensen counted all goods on hand and priced the inventory on the basis of average cost. The total inventory amount was $600,000. No goods in transit were included in this figure.
What amount should appear as inventory on the company’s balance sheet at Dec 31? Explain. If you indicate an amount other than $600,000, state which asset or liability other than inventory also would be changed in amount, assuming that all inventory purchases are made on credit.