Problem
Jensen Tire had two large shipments in transit at December 31. One was a $130,000 inbound shipment of merchandise (shipped December 28. F.D.B. shipping point). Which arrived at Jensen's receiving dock on January 2. The other shipment was a $95,000 outbound shipment of merchandise to a customer. Which was shipped and billed by Jensen on December 30 (terms ROLE. shipping point) and reached the customer on January 3.
In taking a physical inventory on December 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 December 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.