Copyright

Peosta Company identifies the following items for possible inclusion in the taking of a physical...

Question:

Peosta Company identifies the following items for possible inclusion in the taking of a physical inventory. Indicate whether each item should be "Included" or "Not Included" from the inventory taking.

(a) Goods shipped on consignment by Peosta to another company.

(b) Goods in transit from a supplier shipped FOB destination.

(c) Goods sold but being held for customer pickup.

(d) Goods held on consignment from another company.

What Is Free-On-Board Destination:

When companies sell goods to their customers, they generally specify whether the terms of the sale are Free-On-Board Destination or Shipping point. When Free-On-Board Destination is elected, the goods only in fact legally transfer to the buyer when they arrive physically at the client location.

Answer and Explanation:

See below.

(a) Goods shipped on consignment by Peosta to another company.

  • INCLUDED. The risks and rewards of the goods were not transferred to another party and thus they must be included.

(b) Goods in transit from a supplier shipped FOB destination.

  • INCLUDED. The passing of control only occurs at the destination. Since the goods have not yet arrived, they are included in the balance.

(c) Goods sold but being held for customer pickup.

  • EXCLUDED. If the goods are sold then the risks and rewards of ownership belong to the customer.

(d) Goods held on consignment from another company.

  • EXCLUDED. The risks and rewards of the goods were not transferred to the company from the owner of the goods and thus they must be excluded.

Learn more about this topic:

Loading...
Items that Make Up Merchandise Inventory

from Accounting 101: Financial Accounting

Chapter 6 / Lesson 2
10K

Related to this Question

Explore our homework questions and answers library