Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

5. Inventory

Physical Inventory Count, Ownership of Goods, and Consigned Goods

Financial Accounting

5. Inventory

Physical Inventory Count, Ownership of Goods, and Consigned Goods

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

Goods in transit are included in a purchaser's inventory when:

the goods are held on consignment by the purchaser for another company.

the goods are shipped FOB destination and are in transit to the purchaser.

the goods are consigned to the purchaser.

the goods are shipped FOB shipping point and are in transit to the purchaser.

Previous problemNext problem

Verified step by step guidance

Understand the concept of 'FOB shipping point' and 'FOB destination': FOB stands for 'Free on Board.' When goods are shipped FOB shipping point, ownership transfers to the buyer as soon as the goods leave the seller's premises. When goods are shipped FOB destination, ownership transfers to the buyer only when the goods arrive at the buyer's location.

Analyze the scenario: The problem asks when goods in transit are included in the purchaser's inventory. This depends on the terms of shipment (FOB shipping point or FOB destination).

Focus on the correct answer: Goods shipped FOB shipping point are included in the purchaser's inventory while in transit because ownership has already transferred to the purchaser at the seller's location.

Eliminate incorrect options: Goods held on consignment are not owned by the purchaser, so they are not included in the purchaser's inventory. Similarly, goods shipped FOB destination are not included in the purchaser's inventory while in transit because ownership has not yet transferred.

Conclude: The correct condition for including goods in transit in the purchaser's inventory is when the goods are shipped FOB shipping point, as ownership transfers at the point of shipment.