Castle Packaging Ltd Has Just Completed a Physical Inventory Count

Essay

Castle Packaging Ltd has just completed a physical inventory count at year-end (31 December). All items on the shelves, in storage and in the receiving area were counted and costed on the FIFO basis. The inventory amounted to $95,000. During the audit of the inventory count, the independent auditor discovered the following additional information:
(a) There were goods in transit on 31 December from a supplier with terms FOB destination, costing $10,000. Because the goods had not arrived, they were excluded from the physical inventory count.
(b) On 27 December, a regular customer purchased goods for cash amounting to $1,000 and left them for pickup on 4 January. Kemp Ltd had paid $500 for the goods and, because they were on hand, included them in the physical inventory count.
(c) Kemp Ltd, on the date of the inventory count, received notice from a supplier that goods ordered earlier at a cost of $4,000, had been delivered to the transportation company on 28 December. The terms were FOB shipping point. Because the shipment had not arrived on 31 December, it was excluded from the physical inventory.
(d) On 31 December there were goods in transit to customers, with terms FOB shipping point, amounting to $800 (expected delivery on January 8). Because the goods had been shipped, they were excluded from the physical inventory count.
(e) On 31 December, Kemp Ltd shipped $2,500 worth of goods to a customer, FOB destination. The goods arrived to the customer on 5 January. Because the goods were not on hand, they were not included in the physical inventory count.
(f) Kemp Ltd, as the consignee, had goods on consignment that cost $3,000. Because these goods were on hand as of 31 December they were included in the physical inventory count.
Analyse the above information and calculate a corrected amount for the ending inventory. Explain the basis for your treatment of each item.