Forever Young Game Stores (FYG) has taken a physical count of its inventory at March 31, its fiscal year-end. After reviewing the accounting records and documentation, the following items have been discovered:(a) An invoice from Shreck Co. indicates that $30,000 of games were shipped to FYG on March 27, terms FOB shipping point. The games and invoice did not arrive at FYG until April 2 and were not included in the physical count.(b) An invoice from Gamers, Inc. indicates that $8,000 of games were shipped to FYG on March 29, terms FOB destination. The games and invoice did not arrive at FYG until April 2 and were not included in the physical count.The physical count and cost assignment on March 31 prior to these two items is $440,000. The cost of goods sold for FYG is $2,100,000.1.

Question

Calculate the amount that should be reported as ending inventory for FYG.2. Calculate the days' sales in inventory before and after the appropriate adjustments for inventory.

What will be an ideal response?

Answer 1

1. The ending inventory should be adjusted to $470,000. Only the $30,000 invoice needs to be added since it was shipped FOB shipping point, the owner (FYG) should include the inventory in the ending balance. ($440,000 + $30,000 = $470,000)
2. Before adjustment: $440,000/$2,100,000 * 365 = 76.5 days
After adjustment: $470,000/$2,100,000 * 365 = 81.7 days