Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition

ANALYSIS OF MULTIPLE-CHOICE TYPE QUESTIONS

1. Question

   (L.O. 1) At December 31, 2014, a physical count of merchandise inventory belonging to Klintworth Corp. showed $500,000 to be on hand. The $500,000 was calculated before any potential necessary adjustments related to the following:

   • Excluded from the $500,000 was $80,000 of goods shipped FOB shipping point by a vendor to Klintworth on December 30, 2014 and received on January 3, 2015.
   • Excluded from the $500,000 was $72,000 of goods shipped FOB destination to Klintworth on December 30, 2014 and received on January 3, 2015.
   • Excluded from the $500,000 was $95,000 of goods shipped FOB destination by Klintworth to a customer on December 28, 2014. The customer received the goods on January 4, 2015.

   The correct amount to report for inventory on Klintworth's balance sheet at December 31, 2014 is:

   1. $572,000.
   2. $595,000.
   3. $675,000.
   4. $747,000.

   Explanation:

   The $80,000 should be added to the $500,000 because FOB shipping point means the title transferred when the goods left the seller's dock on December 30, 2014. The $72,000 is properly excluded from the ending inventory because title did not pass to Klintworth until Klintworth received the goods on January 3, 2015. The $95,000 should be added to the $500,000 because the goods belong to Klintworth until they are received by the customer (in 2015)

2. Question

   (L.O. 3) Which inventory ...