[Onepasscpamaster]

I am really confused with following questions (related to Inventory counting)

Any advise will be really appreciated.!!!

Thanks

Q1.

On 12/31, Auditor performed test counts and result was as following

Book Qts, Actual counting.

1000 800

new inventories were ordered as F.O.B Shipping point, Auditor realized that this client purchased new inventories.

This new purchased inventories were shipped before 12/31 but arrived to client warehouse after 12/31.

Invoice was also received and recorded accordingly after 12/31.

Adjustment

No Adjustment required.. I guess???

Q2.

On 12/31, Auditor performed test counts and result was as following

Book Qts, Actual counting.

2000 2000

New inventory were ordered as F.O.B Shipping point, Auditor realized that this client purchased new inventory.

This new purchased inventory was shipped before 21/31 but arrived to client warehouse after 12/31.

Invoice was received and recorded accordingly BEFORE 12/31.

Adjustment

Inv / Account Payable ????

Thank you

[supervisor]

I will take a shot at this.

Q1 – since term is FOB shipping point, title passes to buyer at the shipping point and therefore, since inventory was shipped before 12/31. the new inventory should be recorded as of 12/31. The books is showing 1000 because there was already an adjustment to record the new inventory and therefore no adjustment is deemed necessary. The count shows 800 because the new inventory has not been physically received by the customer.

Q2 – same concept as above. The count is the same as what is on the books which means customer did not account for the new inventory that was shipped prior to 12/31 and thus an adjustment is necessary.

I think what is important here is to think about the shipping term which is FOB shipping point.

Hope this helps!

BEC 10/13 PASSED 77
AUD 04/12 PASSED 83
FAR 08/12 PASSED 76
REG 02/13 PASSED 76

Licensed in PA on 12/23/13. Yea boy!!

[xibadx]

on Q1: “Invoice was also received and recorded accordingly after 12/31.”

Shouldn't the invoice have been recorded (DR: Inv, CR: AP) when the items were shipped since it was fob shipping point?

All passed on first try - Licensed CPA Texas
Studying tip: Study throughout the day (short intervals, no more than 3hrs/day total), take exam later in the day and cram before your exam.

[MCLKT]

I don't have any experience in companies with Inventory, but it almost seems like there should be an inventory in transit account on the balance sheet. Is there?

So when Inv. is shipped FOB shipping you can increase your inventory account but you don't hit payables until AFTER the inventory is received…. maybe just make an accrual entry (DR Inventory CR In Transit) for the stuff in transit. Then post DR Transit CR AP once the goods have arrived and the shipping doc is matched with the P.O. and invoice and approved for payment.

A:[73]97 F:[74]85 R:86 B:[74]82
*NINJA 10 Pt. COMBO & Yaeger*

[musicamor]

For question one, you need an accrual – debit inventory in transit, credit unvouchered receipts.

For question two, no adjustment necessary.

Texas CPA - licensed in 2012!!!

[xibadx]

But what about the common carrier rule… doesn't that apply?

All passed on first try - Licensed CPA Texas
Studying tip: Study throughout the day (short intervals, no more than 3hrs/day total), take exam later in the day and cram before your exam.

[vanessa000abc]

I agree with Supervisor. Anybody has a different view? Thanks.

[Author]

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