Question

costs of the products are accounted for as inventory of Starbucks and kept at the third party and then accounted for as cost of goods sold when the item is shipped to the distubtror (target or Wawa) The example is:

one time charge, matching principle, all of the above, historical cost, none of the above, deferred revenue or estimate

Answer 1

Answer is matching principle.

When the cost of the products are accounted for as inventory and kept at the third party and then accounted for as cost of the goods sold when the item is shipped to the distributor, then it is as per matching principle. As per matching principle, all costs are reported or matched in the period in which the related revenue is earned. In this question, when the goods were lying at third party's, then they are counted as inventory, they will not be an expense because they are not yet sold. When the goods have been shipped to distributor, it means that revenue has been earned.So, their cost will be treated as the cost of the goods sold.