Questions: On December 31, Salz Company sells 1,000 units of merchandise to Wein Corp. and 2,000 units to Torr Corp. Shipping terms are f.o.b. destination for the 1,000unit sale and f.o.b. shipping point for the 2,000 -unit sale and the goods have shipped. If Salz still has 10,000 physical units in its inventory after these sales, how many units should Salz include in its ending inventory on December 31? 13,000 units 12,000 units 11,000 units 10,000 units

The answer is the second one (B): 12,000 units.

Explanation:

1. Understanding Shipping Terms:

   • F.O.B. Destination: The seller retains ownership of the goods until they reach the buyer's location. Therefore, the 1,000 units sold to Wein Corp. are still considered part of Salz Company's inventory until they are delivered.
   • F.O.B. Shipping Point: The buyer takes ownership of the goods as soon as they are shipped. Thus, the 2,000 units sold to Torr Corp. are no longer part of Salz Company's inventory once they have been shipped.

2. Calculating Ending Inventory:

   • Salz Company has 10,000 physical units in its inventory after the sales.
   • Since the 1,000 units sold to Wein Corp. are still in transit and considered part of Salz's inventory, they should be added to the physical count.
   • The 2,000 units sold to Torr Corp. are not included in Salz's inventory because they are already considered delivered once shipped.

3. Final Calculation:

   • Physical units in inventory: 10,000 units
   • Add units still in transit to Wein Corp.: 1,000 units
   • Total units in ending inventory: 10,000 + 1,000 = 12,000 units

Therefore, Salz should include 12,000 units in its ending inventory on December 31.