ChemCo International Ltd manufactures specialty chemicals, vehicle airbags and salt. Recently, its specialty chemicals business was reorganised, and three manufacturing plants were closed. Profits were generally high, however, mostly because of an improved product mix. The vehicle airbag business did very well, with sales more than 30% higher than the previous year. However, towards the end of the year, questions were being raised about the safety of airbags, and this put the future of this business in some jeopardy. The salt business had dramatically increased volume as a result of the increased demand for ice-control salt arising from an unusually severe winter in the Snowy Mountains. However, as ice-control salt has a low profit margin, profits increased only modestly.

The current assets portion of ChemCo International’s statement of financial position for the year ended 30 June 2016 is shown below.

Assume that the following transactions occurred during June and July 2016.

1. Office supplies were shipped to ChemCo by Office Max, FOB destination. The goods were shipped on 29 June and received on 30 June.

2. ChemCo purchased specialty plastic from Uniroyal Technology for use in airbag manufacture. The goods were shipped FOB shipping point on 1 July, and were received by ChemCo on 4 July.

3. Ford Motor Company purchased 10 000 airbags to be used in the manufacture of new cars. These were shipped FOB shipping point on 30 June, and were received by Ford on 2 July.

4. Bassett Furniture shipped office furniture to ChemCo, FOB destination, on 29 June. The goods were received on 3 July.

5. Inland Specialty Chemical shipped chemicals that ChemCo uses in the manufacture of airbags and other items. The goods were sent FOB shipping point on 29 June, and were received on 1 July.

6. ChemCo purchased new cars for its executives from GMH. The cars were shipped FOB destination on 19 June, and were received on 2 July.

7. ChemCo shipped salt to the Snowy Mountains Municipal Council, FOB destination. The shipment arrived in the Snowy Mountains on 2 July.

8. ChemCo purchased steel to be used in expanding its manufacturing plant. The steel arrived on 6 July, shipped FOB shipping point.

Required

With the class divided into groups, answer the following:

(a) Which items would be owned by ChemCo International Ltd as of 30 June 2016?

(b) Identify which transactions involve ChemCo’s inventory account as of 30 June 2016 and which affect it after 30 June 2016.

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CHEMCO INTERNATIONAL LTD Statement of financial position (partial) as at 30 June 2016 (in millions) Current assets Cash and cash equivalents Accounts receivable Less: Allowance for doubtful debts Inventories Other current assets Total current assets $479.2 10.8 $ 138.0 468.6 381.0 125.4 $1113.0