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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Goods in Transit Gravais Company made two purchases on December 29, 2019. One purchase for $3,000 was shipped FOB destination, and the second for $4,000 was shipped FOB shipping point. Neither purchase had been received nor paid for on December 31, 2019.

Required:

Which of these purchases, if either, does Gravais include in inventory on December 31, 2019? What is the cost?

To determine

Identify the purchase, if either, should Company G include in inventory on December 31, 2019 and explain the cost.

Explanation

FOB destination: When the seller bears the freight charges for the delivery of merchandise from the point of origin, it is referred to as FOB (freight-on-board) destination. So, the title of ownership would be held with the buyer only at the destination point.

FOB shipping point: When the buyer bears the freight charges for the delivery of merchandise from the point of origin, it is referred to as FOB (freight-on-board) shipping point. So, the title of ownership is held with the buyer, from the shipping point itself.

  • The purchase transaction of $3,000 made on December 29, 2019 is shipped under FOB destination...

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