In: Accounting
The following items were in transit to or from Power Corp. on December 31, 2009
Goods costing $4000 were sent FOB shipping point from Power Corp. to a customer
Goods costing $2580 were sent FOB destination to Power Corp. from a vendor
Goods costing $2960 were sent FOB destination from Power Corp. to a customer
Goods costing $1957 were sent FOB shipping point to Power Corp. from a vendor.
a) Which of these items should Power Corp. include in its December 31, 2009 inventory?
b) Explain the rationale for either including or excluding the items.
Answer a)
Include / Exclude | ||
---|---|---|
1) | Goods costing $4000 were sent FOB shipping point from Power Corp. to a customer | Exclude |
2) | Goods costing $2580 were sent FOB destination to Power Corp. from a vendor | Exclude |
3) | Goods costing $2960 were sent FOB destination from Power Corp. to a customer | Include |
4) | Goods costing $1957 were sent FOB shipping point to Power Corp. from a vendor | Include |
Answer b:
Goods in transit in items number 1 & 4 goods were sent FOB shipping point thus Power Corp being a seller in item 1 , goods are excluded from his inventory & in case of item 4 Power Corp is a buyer of goods, thus goods are included in its inventory.
Goods in transit in items number 2 & 3 goods were sent FOB destination thus Power Corp being a buyer in item 2 , goods are excluded from his inventory & in case of item 3 Power Corp is a seller of goods, thus goods are included in its inventory