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

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Multiple Choice

Which of the following should be included in the physical inventory of a company at year-end?

Goods shipped by the company to a customer, FOB shipping point

Goods held on consignment for another company

Goods sold to customers, shipped FOB destination but not yet delivered

Goods in transit to the company, shipped FOB shipping point

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Verified step by step guidance

Step 1: Understand the concept of FOB (Free on Board) shipping terms. FOB shipping point means the buyer takes ownership of the goods once they leave the seller's location, while FOB destination means the seller retains ownership until the goods are delivered to the buyer.

Step 2: Analyze the first scenario: 'Goods shipped by the company to a customer, FOB shipping point.' Since ownership transfers to the customer at the shipping point, these goods should not be included in the company's physical inventory at year-end.

Step 3: Analyze the second scenario: 'Goods held on consignment for another company.' Consigned goods are owned by the consignor (the other company), not the consignee (your company). Therefore, these goods should not be included in your company's physical inventory.

Step 4: Analyze the third scenario: 'Goods sold to customers, shipped FOB destination but not yet delivered.' Since ownership remains with the seller until the goods are delivered, these goods should be included in the company's physical inventory at year-end.

Step 5: Analyze the fourth scenario: 'Goods in transit to the company, shipped FOB shipping point.' Since ownership transfers to your company at the shipping point, these goods should be included in your company's physical inventory at year-end.