On December 28, 2012 Piedmont Supply Co. ships $155,000 of merchandise by common
ID: 2423719 • Letter: O
Question
On December 28, 2012 Piedmont Supply Co. ships $155,000 of merchandise by common carrier to the Maxwell Company. The terms of the sale are 3/15, n/45, FOB destination. It takes 5 days for the merchandise to arrive at Maxwell Company. Both Piedmont Supply Co. and Maxwell Company have December 31 year-ends. Can Piedmont Supply Co. reports this sale on its income statement for fiscal 2012? Why?On December 28, 2012 Piedmont Supply Co. ships $155,000 of merchandise by common carrier to the Maxwell Company. The terms of the sale are 3/15, n/45, FOB destination. It takes 5 days for the merchandise to arrive at Maxwell Company. Both Piedmont Supply Co. and Maxwell Company have December 31 year-ends. Can Piedmont Supply Co. reports this sale on its income statement for fiscal 2012? Why?On December 28, 2012 Piedmont Supply Co. ships $155,000 of merchandise by common carrier to the Maxwell Company. The terms of the sale are 3/15, n/45, FOB destination. It takes 5 days for the merchandise to arrive at Maxwell Company. Both Piedmont Supply Co. and Maxwell Company have December 31 year-ends. Can Piedmont Supply Co. reports this sale on its income statement for fiscal 2012? Why?
Explanation / Answer
On December 28, 2012 Piedmont Supply Co. ships $155,000 of merchandise by common carrier to the Maxwell Company. The terms of the sale are 3/15, n/45, FOB destination. It takes 5 days for the merchandise to arrive at Maxwell Company. Both Piedmont Supply Co. and Maxwell Company have December 31 year-ends. Can Piedmont Supply Co. reports this sale on its income statement for fiscal 2012? Why?
Pieodmont Supply co. cannot report this sale on its income statement for fiscal 2012 because term of sale is FOB destination the title to the goods usually passes from the seller to the buyer at the destination. This means that goods in transit should be reported as inventory by the Piedmont, since technically the sale does not occur until the goods reach the destination, goods reached the destination after 5 days i.e on Jan 1st 2013 both the company close its accounts on 31st dec.
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