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P 8-2: Did Rasul correctly account for each purchase?

The following inventory transactions took place near December 31, 2011, the end of the Raul Company's fiscal year-end:

1. On December 27, 2011, merchandise costing $2,000 was shipped to the Myers Company on consignment. The shipment arrived at Myer's location on December 29, but none of the merchandise was sold by the end of the year. The merchandise was not included in the 2011 inventory.
2. On January 5, 2012, merchandise costing $8,000 was received from a supplier and recorded as a purchase on that date and not included in the 2011 ending inventory. The invoice revealed that the shipment was made f.o.b. shipping pointy on December 28, 2011.
3. On December 29, 2011, the company shipped merchandise costing $12,000 to a customer f.o.b. destination. The goods, which arrived at the customer's location on January 4, 2012, were not included in Rasul's 2011 ending inventory. The sale was recorded 2011.
4. Merchandise costing $4,000 was received on December 29, 2011, on consignment from Aborn Company. A purchase was not included and the merchandise was not included in 2011 ending inventory.
5. Merchandise costing $6,000 was received and recorded as a purchase on January 8, 2012. The invoice revealed that the merchandise was shipped from the supplier on December 28, 2011, f.o.b. destination. The merchandise was not included in 2011nending inventory.

State whether Rasul correctly accounted for each of the above transactions. Give the reason for your answer.

Solution Preview

1. Wrong. Inventory, even if it is not on-site (consigned elsewhere) should be included as their inventory. They still have title and risk of loss. Rasul should include this merchandise in its 2011 ending inventory.

2. Wrong. FOB shipping point means that the receiver takes title when the goods are shipped and so Rasul ...

Solution Summary

Your tutorial is 202 words and explains why three are wrong and two are correct treatment of the goods in question.