Goods in Transit
Entity A sold $25,000 merchandise to Entity B with the terms of FOB destination on December 22, 20×1. Merchandise arrived at destination on January 6, 20×2. As of December 31, 20×1, which entity should report the merchandise in the balance sheet as inventory?
Entity A
[Note]
Because the merchandise was shipped with the terms of FOB destination, the ownership of merchandise is transferred to Entity B (Buyer) when the merchandise arrives at destination. As of December 31, 20×1, the merchandise did not arrive at destination, and Entity A (Seller) retains the ownership of merchandise. Entity A reports the merchandise in the balance sheet at December 31, 20×1.
Because the merchandise was shipped with the terms of FOB destination, the ownership of merchandise is transferred to Entity B (Buyer) when the merchandise arrives at destination. As of December 31, 20×1, the merchandise did not arrive at destination, and Entity A (Seller) retains the ownership of merchandise. Entity A reports the merchandise in the balance sheet at December 31, 20×1.
Consigned Goods
On December 21, 20×1, Entity C (Consignor) sent merchandise to Entity D (Consignee) for a consignment sale. The merchandise was sold to customer on January 10, 20×2. As of December 31, 20×1, which entity should report the merchandise in the balance sheet as inventory?
Entity C reports the merchandise in the balance sheet as inventory.
[Note]
Consigned goods are the inventory of consignor until the consigned goods are sold to customer. As of December 31, 20×1, the consigned merchandise was not sold to customer, and Entity C (Consignor) should report the merchandise in the balance sheet as inventory.
Consigned goods are the inventory of consignor until the consigned goods are sold to customer. As of December 31, 20×1, the consigned merchandise was not sold to customer, and Entity C (Consignor) should report the merchandise in the balance sheet as inventory.