A company just completed a physical inventory count at year-end, December 31. Items were counted and costed on a FIFO basis. The inventory amounted to $40,000. The following information was not included in the inventory amount.

(b) A customer purchased goods for cash amounting to $2,650, but the amounts were not delivered until the next year. The cost of the goods for the company were $1,300, and that amount was included in the physical inventory count.


For this case, since the goods have not been delivered would I decrease (1,300) from the inventory to rectify it?

It would be more appropriate to adjust the sales account for income received in advance. As the goods had not beeen delivered they were correctly counted as part of inventory