Question

A shipment of inventory valued at $1,500 was shipped by a supplier on March 28, 2020, scheduled to arrive at PHL on March 30, 2020, but it arrived on April 3, 2020. It was delayed because it was shipped by truck and got caught in a snowstorm. The shipment was FOB shipping point. Joan records shipments based on the arrival date at the company’s warehouse and therefore no entry had been made to include the inventory. Of course it was also not included in the physical count that took place on March 31, 2020, as it was not present for warehouse personnel to count.

The companies year end is March 30 2020.

In accordance with ASPE, is this transaction properly recorded? If yes please explain how. If no, please explain why its wrong and how to fix it.

Answer 1

ANSWER

According to ASPE the transaction above is not properly recorded. the shipment was on terms of FOB shipping point,which means the sales should be recorded at the time of shipment departed from seller or at the time the goods loaded at sellers dock.

FOB SHIPPING POINT

If the shipment is designated as freight on board (FOB) shipping point, ownership transfers to the buyer as soon as the shipment departs the seller. The selling  takes place at the time when seller puts the goods on a common carrier at the seller's dock. Therefore, when the goods are being transported to the buyer, they are owned by the buyer and the buyer is responsible for the shipping costs.