Stallman Company took a physical inventory on December 31 and determined that goods costing $220,000 were on hand. Not included in the physical count were $20,000 of goods purchased from Pelzer Corporation, FOB shipping point, and $21,600 of goods sold to Alvarez Company for $29,000, FOB destination. Both the Pelzer purchase and the Alvarez sale were in transit at year-end. What amount should Stallman report as its December 31 inventory?

Stallman Company took a physical inventory on December 31 and determined that goods costing $220,000 were on hand. Not included in the physical count were $20,000 of goods purchased from Pelzer Corporation, FOB shipping point, and $21,600 of goods sold to Alvarez Company for $29,000, FOB destination.

Both purchases and sales have to be accounted for inventory. The purchase is FOB shipping point, therefore it is the responsibility of Stallman. The sale is FOB destination, it hasn't reached the destination, consequently, it is the responsibility of Stallman.

Inventory= 220,000 + 20,000 + 21,600= $261,600