Under FOB shipping point terms, when does the buyer generally include goods in transit in its inventory?
Correct answer: C. When the goods are shipped by the supplier
- A. When the goods arrive at the buyer's warehouse
- B. When the supplier receives the buyer's payment
- C. When the goods are shipped by the supplier
- D. When the buyer sells the goods to a customer
Explanation
FOB shipping point normally transfers ownership and risk to the buyer when the seller dispatches the goods. The buyer therefore records the goods in transit from the shipment date, subject to the contract terms.
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About Inventory Valuation
Inventory valuation determines the cost of unsold goods and its effect on cost of sales and profit. The work covers inventory counts, included costs, FIFO and weighted-average costing, and the rule that inventory is reported at the lower of cost and net realisable value, not simply at its expected selling price.
Practise Inventory Valuation
34 free Inventory Valuation MCQs from Accounting, each with the correct answer and an explanation. Unlimited attempts, no account needed.
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