Question

Homestead Crafts, a distributor of handmade gifts, operates out of owner Emma Finn’s house. At the end of the current period, Emma looks over her inventory and finds that she has:

• 1,300 units (products) in her basement, 20 of which were damaged by water and cannot be sold.
• 350 units in her van, ready to deliver per a customer order, terms FOB destination.
• 80 units out on consignment to a friend who owns a retail store.

How many units should Emma include in her company’s period-end inventory?

Short answer

The business entity will report1,710 units in the ending inventory.

Step-by-step solution

Definition of FOB Destination

FOB destination is the term for transferring or selling inventory under which the ownership of the inventory remains with the seller until it reaches the destination.

Units in Ending Inventory

Particular	Units
Units on hand	1,300
FOB destination inventory in Van	350
Inventory out on consignment	80
Less: Damaged inventory	(20)
Ending inventory	1,710 units