BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Goods in transit which were purchased FOB shipping point
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Goods in transit which were purchased FOB destination
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Goods received from another entity on consignment
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Goods in transit to a customer which were sold to the customer FOB shipping point
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Detailed explanation-1: -The correct answer is c) goods in transit from another company shipped FOB shipping point. Goods in transit from another company shipped FOB shipping point should be included in the buyer’s inventory.
Detailed explanation-2: -Answer No. The seller will not include in the year end inventory. FOB shipping point means “free on board shipping point", that is the buyer incurs all transportation costs after the merchandise has been shipped. Ownership of the goods passes to the buyer at the FOB shipping point.
Detailed explanation-3: -Answer: Goods in transit are typically recorded on the seller’s books of account under the heading “Inventory” until they reach their destination.
Detailed explanation-4: -FOB is a shipping term that stands for “free on board.” If a shipment is designated FOB (the seller’s location), then as soon as the shipment of goods leaves the seller’s warehouse, the seller records the sale as complete. The buyer owns the product en route to its warehouse and must pay any delivery charges.
Detailed explanation-5: -Goods in transit which were purchased f.o.b. shipping point should be included in the company’s inventory.