Question

Which of the following items should be included in a company's inventory at the balance sheet date? A) Goods sold to a customer that are being held for the customer to call for at his or her convenience. B) Goods sold to a customer, that were shipped f.o.b. shipping point. C) Goods in transit, which were purchased f.o.b. shipping point. D) Goods received from another company for sale on consignment.

Answer 1

Answer:

The correct answer is C.

Explanation:

In the inventory of a company, when it is on the balance sheet date, goods in transit purchased at an f.o.b. shipping point must be included.

Goods in transit are goods that are not physically in the warehouse but have already been paid for by the company. This already acquired merchandise is property of the company, only that its arrival is only waited for to the deposit.

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Answer 2

Answer:

C) Goods in transit, which were purchased f.o.b. shipping point

Explanation:

Inventory is indicated as current asset in balance sheet. Goods in transit means goods are on the way for delivery which means customers can place order while waiting for delivery. F.O.B (free on board) shipping point means the receiver will bear any loss or damage incurred during shipping. The goods in transit belongs to the receiver which makes it an asset.