Boilard Inc. planned to report inventory of $ 50,000 based on its physical count of inventory in its warehouse at year- end, December 31, 2013. During the audit, the auditor developed the following additional information:
a. Goods from a supplier costing $ 300 are in transit with Canada Post on December 31, 2013. The terms are F. O. B. shipping point (explained below). Because these goods had not arrived, they were excluded from the physical inventory count.
b. Boilard delivered samples costing $ 400 to a customer on December 27, 2013, with the understanding that they would be returned to Boilard on January 18, 2014. Because these goods were not on hand, they were excluded from the physical inventory count.
c. On December 31, 2013, goods in transit to customers, with terms F. O. B. shipping point, amounted to $ 2,000 (the expected delivery date was January 10, 2014). Because the goods had been shipped, they were excluded from the physical inventory count.
d. On December 31, 2013, goods in transit to a customer, F. O. B. destination, amounted to $ 1,000 and are not expected to arrive at their destination before January 10, 2014. Because the goods had been shipped, they were not included in the physical inventory count.
Required:
Boilard is required to include in inventory all goods for which it has title. Note that the point where title (ownership) changes hands is determined by the shipping terms in the sales contract. When goods are shipped “F. O. B. shipping point,” title changes hands at shipment and the buyer normally pays for shipping. When they are shipped “F.O.B. destination,” title changes hands on delivery, and the seller normally pays for shipping. Begin with the $ 50,000 inventory amount, and compute the correct amount for the ending inventory. Explain the basis for your treatment of each of the preceding items.