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Various issues relating to inventory accounting

1) Why are consigned goods not included in the physical inventory counts?

2) Why are goods that are not physically present included in the physical inventory count?

3) What impact does FOB shipping point and FOB destinations have on revenue

recognition?

4) Which inventory costing method is GAAP approved? Why?

5) Can you change your inventory costing method? Why or why not?

6) What effects do the different inventory costing methods have on your net income and

income tax?

Solution Preview

1) Why are consigned goods not included in the physical inventory counts?

Consigned goods are goods which have been given to a consignee who attempts to sell them. Thus the goods are legally of the compnay but are not physically with the compnay and hence are not included in the physical inventory count.

2) Why are goods that are not physically present included in the physical inventory count?

All goods which are owned by the company have to be included in the physical inventory count. The total of the count should match with the inventory value as shown in the records. Even if ...

Solution Summary

The solution answers some theory questions relating to inventory accounting

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