16. Purchaser Inc, and Supplier Inc. both have December 31 year-ends. Purchaser

Question

16. Purchaser Inc, and Supplier Inc. both have December 31 year-ends. Purchaser Inc. purchases inventory from Supplier Inc. and the terms include FOB destination. If the inventory is in transit on December 31, the following is correct about this inventory (a) The amount of the inventory should be included in Purchaser's ending inventory and the amount of the inventory should be included in Supplier's ending inventory (b) The amount of the inventory should be included in Purchaser's ending inventory and the amount of the inventory should not be included in Supplier's ending inventory (c) The amount of the inventory should not be included in Purchaser's ending inventory and the amount of the inventory should be included in Supplier's ending inventory. (d) The amount of the inventory should not be included in Purchaser's ending inventory and the amount of the inventory should not be included in Supplier's ending inventory (e) None of the above

Explanation / Answer

Ans: Option C

Reason: It is a FOB Destination transaction, which is used to mean the seller of the goods pays all expenses in putting the goods on board and delivering them to buyers destination. so until the goods arrive at the destination all the risk related to the inventory aren't transferred to the buyer it should be included in the inventory of the seller as goods in transit.

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