Question

For each of the scenarios provided below indicate who owns the inventory on August 31, 2017...

For each of the scenarios provided below indicate who owns the inventory on August 31, 2017 and why. (HINT: to answer the WHY part of the question be sure to mention SHIPPING TERMS and OWNERSHIP! Full marks will not be awarded unless you support your choice with FACTS.)

On August 28, 2017 Milk Inc. shipped inventory to Cream Ltd. The terms are FOB shipping point. Cream Ltd. received the goods on September 2, 2017.

On August 29, 2017 Salt Ltd. shipped inventory to Sugar Inc. The terms are FOB destination. Sugar Inc. received the goods on September 4, 2017.

A. Included in ______________’s ending inventory on their balance sheet because

B. Included in ______________’s ending inventory on their balance sheet because

Homework Answers

Answer #1

In Case A :Included in Cream Ltd’s ending inventory on their balance sheet because terms are FOB shipping point:

FOB shipping point term means that the buyer takes delivery of goods being shipped to it by a supplier once the goods leave the supplier's shipping point. Since the buyer takes ownership at the point of departure from the supplier's shipping point, the supplier should record a sale at that point and buyer should record sale that point.

In Case B: Included in Salt ltd.’s ending inventory on their balance sheet because term are FOB destination:

FOB destination terms means that the buyer takes delivery of goods being shipped to it by a supplier once the goods arrive at the buyer's receiving dock, .

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