Premier Bank and Trust is considering giving Alou Company a loan. Before doing so, management decides that fur?

Determine the correct inventory amount on December 31.

Inventory balance before adjustments $297,000

1. Alou sold goods costing $38,000 to Comerico Company, FOB shipping point, on December 28. The goods are not expected to arrive at Comerico until January 12. The goods were not included in the physical inventory because they were not in the warehouse.
This is correct. No adjustment needed.

2. The physical count of the inventory did not include goods costing $95,000 that were shipped to Alou FOB destination on December 27 and were still in transit at year-end.
This is correct. No adjustment needed.

3. Alou received goods costing $19,000 on January 2. The goods were shipped FOB shipping point on December 26 by Grant Co. The goods were not included in the physical count.
The goods belonged to Alou on Dec 26, so +$19,000

4. Alou sold goods costing $35,000 to Emerick Co., FOB destination, on December 30. The goods were received at Emerick on January 8. They were not included in Alou's physical inventory.
The goods belonged to Alou on Dec 31. They will belong to Emerick Co. only on Jan. 8, so +$35,000

5. Alou received goods costing $44,000 on January 2 that were shipped FOB shipping point on December 29. The shipment was a rush order that was supposed to arrive December 31. This purchase was included in the ending inventory of $297,000.
The goods only belonged to Alou on Jan. 2, so should not be included in inventory on Dec 31, so -$44,000

The correct inventory amount $307,000

Accountants report a merchandiser’s and a manufacturer’s revenues when a sale is made. The term, FOB Shipping Point, indicates that the sale occurred at the shipping point—at the seller’s shipping dock. FOB Destination indicates that the sale will occur when it arrives at the destination—at the buyer’s receiving dock.

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