Crane Inc. took a physical inventory at the end of the year and determined that $834000 of goods were on hand. In addition, the following items were not included in the physical count. Crane, Inc. determined that $94000 of goods purchased were in transit that were shipped f.o.b. destination (goods were actually received by the company three days after the inventory count). The company sold $41500 worth of inventory f.o.b. destination that did not reach the destination yet. What amount should Crane report as inventory at the end of the year?

Generally, F.O.B. terms determines which party would include stock in transit in inventory. Goods in transit in any case always belongs to the party holding legal ownership. When the goods in transit are sold F.O.B. destination, they belong to the purchaser only when they arrive at their final destination. When the goods in transit are sold F.O.B. shipping point, they belong to the purchaser once they shipped by the seller.

Applying the above to the scenario, the $94000 of goods purchased were in transit that were shipped f.o.b. destination, will not be included in inventory but the goods sold $41500 worth of inventory f.o.b. destination that did not reach the destination yet, will have to be included.

Therefore Inventory figure should be the $834,000 in stock plus the $41,500 sold goods in transit, on the terms of f.o.b destination.