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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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For goods in transit at the end of a period, describe how a company determines if the goods should be included in inventory.

To determine

Explain the manner in which a company determines whether the goods should be included in inventory when the goods are in transit in the end of the period.

Explanation

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.

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.

When the goods are in transit in the end of the period, the shipping terms determines whether the goods should be included in inventory...

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