Inventory Accounting Help?

Question

Company X doing ending inventory as of 2/28/05
A) X shipped goods costing $800 to a customer and charged the customer $1000. The goods were shipped with terms FOB destination, customer received goods March 2.
B) On February 26, Seller Inc. shipped goods to Company X under FOB shipping point. Goods were received March 2.
C) Company X had $500 inventory in a warehouse. The inventory is designated for a customer who requested the goods be shipped March 10.
D) Also in warehouse is $400 of inventory that Craft Producers shipped to Company X on consignment.
E) On February 26, Company X issued a purchase order to get goods costing $750. The goods were shipped with terms FOB destination on February 27. Company X received the goods on March 2
F) On February 26, X shipped goods to a customer under terms FOB shipping point. The invoice price was $350 plus $25 for freight; the cost of the items was $280. Customer received items on March 2.

For each transaction, should it be included in ending inventory, and if so, what amount?

Answer 1

Under the terms of "FOB shipping point," the title of the goods passes to the buyer at the shipping point. Similarly, under the terms of "FOB destination", the title of the goods passes to the buyer when the goods arrive at their destination.

A) X shipped goods costing $800 to a customer and charged the customer $1000. The goods were shipped with terms FOB destination, customer received goods March 2.
Title passed only on March 2, so on Feb 28, $800 should be in X's ending inventory. Inventory should always be at cost. Ignore the selling price.

B) On February 26, Seller Inc. shipped goods to Company X under FOB shipping point. The invoice price was $350 and freight was $25. Goods were received March 2.
Title passed on Feb 26, so on Feb 28, $350 plus $25 should be in X's ending inventory, under the category "Goods in transit" if desired.

C) Company X had $500 inventory in a warehouse. The inventory is designated for a customer who requested the goods be shipped March 10.
If the goods were merely marked for the customer but no invoice had been issued yet, then the $500 should be in X's ending inventory.

D) Also in warehouse is $400 of inventory that Craft Producers shipped to Company X on consignment.
Consignment goods are not X's goods and should be set aside during the stockcount and should not be in X's ending inventory.

E) On February 26, Company X issued a purchase order to get goods costing $750. The goods were shipped with terms FOB destination on February 27. Company X received the goods on March 2
Title passed only on March 2, so on Feb 28, the goods did not belong to X and should not be in its ending inventory.

F) On February 26, X shipped goods to a customer under terms FOB shipping point. The invoice price was $350 plus $25 for freight; the cost of the items was $280. Customer received items on March 2.
Title passed on Feb 26, so on Feb 28, the goods were no longer X's and should not be in ending inventory.