Question

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6) The balance in Dallas Company's accounts payable account at December 31, 2019 was P1,170,000 before any year- end adjustments relating to the following: • Goods were in transit from a vendor to Dallas on December 31, 2019. The invoice cost was P65,000 and the goods were shipped FOB shipping point on December 29, 2019. The goods were received on January 2, 2020. • Goods shipped FOB shipping point on December 20, 2019 from a vendor to Dallas, were lost in transit. The invoice cost was P32,500. On January 5, 2020, Dallas filed a P32,500 claim against the common carrier. • Goods shipped FOB destination on December 21, 2019, from a vendor to Dallas, were received on January 6, 2020. The invoice cost was P19,500. What amount should Dallas report as accounts payable on its December 31, 2019 statement of financial position? A. 1,202,500 B. 1,222,000 c. 1,235,000 D. 1,267,500

Answer 1

Answer is Optiona D,: P1,267,500

Accounts Payable Balance on 31 December,2019 before adjustments = P1,170,000

Accounts Payable Balance on 31 December, 2019 after adjustments = Accounts Payable Balance on 31 December, 2019 before adjustments + Invoice cost of goods shipped FOB shipping point on 29 December ,2019 + Invoice cost of goods shipped FOB shipping point on 20 December, 2019

Accounts Payable Balance on 31 December, 2019 after adjustments = P1,170,000 + P65,000 + P32,500

= P1,267,500

Explanation

The good that were in transit on 31 December, 2019 and had a invoice value of P65,000 will be added to Accouts Payable Balance because the GOODS WERE SHIPPED FOB SHIPPING POINT on 29 December, 2019. And as per FOB SHIPPING POINT the buyer becomes the owner of the goods on the day they are shipped. So, Dallas company will be liable to pay the seller from 29 December, 2019 ownwards i.e from the date the goods were shipped by the seller.

The goods that were lost in transit and had a invoice value of P32,500 were shipped FOB SHIPPING POINT on 20 December,2019 . As per FOB SHIPPING POINT the buyer becomes the owner of the goods on the day they are shipped by the seller. So, Dallas company will be liable to pay the seller from 20 December, 2019 ownwards i.e from the date goods were shipped by the seller. So, P32,500 will be added to Account Payable Balance.

The goods shipped FOB DESTINATION on December 21, 2019 and had invoice value of P19,500 won't be added to Account Payable Balance on 31, December 2019 as they were received on January 6, 2020 . As per FOB DESTINATION the buyer becomes the owner of the goods when he receives them and since they were received on January 6,2020 So, Dallas Company won't we liable to pay for them as on 31 December,2019 as they become owner of goods on January 6, 2020.

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