Haroah Company took a physical inventory on December 31 and determined that goods costing $218,000 were on hand. Not included in the physical count were $26,960 of goods purchased from Pelzer Corporation, f. o.b. shipping point, and $24,060 of goods sold to Alvarez Company for $28,690, f. o.b. destination. Both the Pelzer purchase and the Alvarez sale were in transit at year-end. What amount should Pharoah report as its December 31 inventory

$269,020

Explanation:

Given that,

Cost of physical inventory on hand at December 31 = $218,000

Goods purchased from Pelzer Corporation not included = $26,960

Goods sold to Alvarez Company not included = $24,060

Pharoah report as its December 31 inventory:

= Physical inventory on hand + Goods purchased from Pelzer Corporation + Goods sold to Alvarez Company

= $218,000 + $26,960 + $24,060

= $269,020

Note:

(1) F.O.B. shipping point: Any sale or purchase of goods under the conditions of F.O.B. shipping point, then the ownership of goods transferred once the amount of goods out for transit.

(2) F.O.B. destination:

Any sale or purchase of goods under the conditions of F.O.B. destination, then the ownership of the goods transferred once the other party received the goods.