Problem #1: Ownership of Goods Determine if the following items should or should

Question

Problem #1: Ownership of Goods Determine if the following items should or should not be included in the inventory count as of 12/31/17 for Little Market. Write Y or N on the homework sheet to turn-in. 1. Goods held on consignment for another company by Little Market. 2. Little Market bought goods on 12/27, terms FOB shipping point. The goods were shipped on 12/28 and arrived to Little Market on 1/2 Little Market sold goods on 12/28, terms FOB destination. The goods were shipped on 12/30 and arrived at the customer's warehouse on 1/3. 3. 4. Little Market has items on consignment at a local store. 5. Little Market bought goods on 12/30, terms FOB destination. The goods were shipped on 1231 and arrived at Little Market on ½ Little Market sold goods on 12/29, terms FOB shipping point. The goods were shipped on 12/31 and arrived at the customer's warehouse on 1/4. 6. 7. Little Market has office supplies on hand 12/31. 8. Little Market purchased goods on 12/27, terms FOB destination. The goods were supposed to arrive on 12/31; however, they did not arrive to Little Market's warehouse until 1/2

Explanation / Answer

Ownership of Goods

1. Goods held on consignment are included in the consignor's inventory, not the consignee's, even though they are not in the consignor's physical possession. So goods held on consignment by little market will not be included in inventory of little market as the little market is a consignee in this case.

2. If the inventory is shipped FOB shipping point, the business is the legal owner of the inventory as soon as the supplier ships it. So the business should include the goods in its inventory if it is shipped by the inventory cutoff date. So goods will be included in little market inventory.

3. The little market is a seller in this condition and term is FOB destination and on cutoff date goods is not reached to the receiver so the title will be vest in little market so goods will be included in little market inventory.

4. Goods physically in local store i.e. with consignee and little market is consigner and title of goods vested with consignor so these goods will be included in inventory of little market.

5. Little market bought the goods on terms FOB destination and gods has not reached to the little market till inventory cutoff date, so it will not be included in little market’s inventory.

6. Little market sold goods on FOB shipping point before inventory cutoff date and also shipped goods before inventory cutoff date so this inventory will not be included in little market’s inventory.

7. Office supplies are purchased to assist in the day-to-day operations of the business and to be reported as an asset in balance sheet but it is not a inventory which is acquired by the business for resale, so office supplies will not be included in inventory.

8. Little market purchase goods on term FOB destination before cutoff date and are supposed to be arrived before cutoff date but arrived not till cutoff date so this shipment will not be included in inventory of little market on cutoff date.

1 N 5 N 2 Y 6 N 3 Y 7 N 4 Y 8 N

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