Question

Fetherston Company's goods in transit at December 31 include: sales made purchases made (1) FOB destination (3) FOB destination (2) FOB shipping point (4) FOB shipping point Which items should be included in Fetherston's inventory at December 31?

Answer 1

Answer: Sales Made - (1) FOB destination

Purchases Made - 4) FOB shipping point

Explanation:

Free On Board (FOB) Destination means that the seller only passes control and ownership of the goods being shipped when the goods reach the Buyer or the place the Buyer will receive it from. That means that the entire time the goods are in transit, the Seller is still the legal owner of the goods. As the good is still in transit on December 31 and is listed as FOB Destination, the goods have not being received by the buyer and are still under the control of Fetherston Company and should be included in inventory.

Free on Board (FOB) Shipping Point means that the ownership of the goods are passed from the seller to the buyer as soon as the seller places the goods at the place of shipment. This means that ownership of the good is that of the Buyer during the shipment process. Fetherston assumed control of such purchases as soon as the seller shipped it so even though it is still in transit, it is under the ownership of Fetherston and should be listed as such in inventory.