Question

The following inventory transactions took place near December 31, 2018, the end of the Rasul Company's fiscal year-end:

On December 27, 2018, merchandise costing $2,000 was shipped to the Myers Company on consignment. The shipment arrived at Myers's location on December 29, but none of the merchandise was sold by the end of the year. The merchandise was not included in the 2018 ending inventory.

On January 5, 2019, merchandise costing $8,000 was received from a supplier and recorded as a purchase on that date and notincluded in the 2018 ending inventory. The invoice revealed that the shipment was made f.o.b. shipping point on December 28, 2018.

On December 29, 2018, the company shipped merchandise costing $12,000 to a customer f.o.b. destination. The goods, which arrived at the customer’s location on January 4, 2019, were not included in Rasul's 2018 ending inventory. The sale was recorded in 2018.

Merchandise costing $4,000 was received on December 28, 2018, on consignment from the Aborn Company. A purchase was notrecorded and the merchandise was not included in 2018 ending inventory.

Merchandise costing $6,000 was received and recorded as a purchase on January 8, 2019. The invoice revealed that the merchandise was shipped from the supplier on December 28, 2018, f.o.b. destination. The merchandise was not included in 2018 ending inventory.

   
Required:
Select whether Rasul correctly accounted for each of the above transactions.

1.	The transaction		correctly accounted for.
2.	The transaction		correctly accounted for.
3.	The transaction		correctly accounted for.
4.	The transaction		correctly accounted for.
5.	The transaction		correctly accounted for.

Answer 1

1. The transaction is not correctly accounted for, Inventory held on consignment by another company should be included in the inventory of the consignor.

2. The transaction is not correctly accounted for, Legal title to merchandise shipped f.o.b shipping point changes hands when the goods are shipped.

3. The transaction is not correctly accounted for, Since the merchandise was shipped f.o.b. destination and did not arrive at the customer's location until 2019, it should be included in Rasul's 2018 ending inventory. The sale should be recorded in 2019

4. The transaction is correctly accounted for,

5. The transaction is correctly accounted for, Since the merchandise was shipped f.o.b. destination and did not arrive at the Rasul's location until 2019, it should be included in Rasul's 2018 ending inventory. The purchase is correctly recorded.