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During 2015 Carne Corporation transferred inventory to Nolan Corporation and agreed to repurchase the merchandise early in 2016.Nolan then used the inventory as collateral to borrow from Norwalk Bank, remitting the proceeds to Carne.In 2016 when Carne repurchased the inventory, Nolan used the proceeds to repay its bank loan.
-On whose books should the cost of the inventory appear at the December 31, 2015 statement of financial position date?
A)Carne Corporation
B)Nolan Corporation
C)Norwalk Bank
D)Nolan Corporation, with Carne making appropriate note disclosure of the transaction

Question

Use the following information for questions 
During 2015 Carne Corporation transferred inventory to Nolan Corporation and agreed to repurchase the merchandise early in 2016.Nolan then used the inventory as collateral to borrow from Norwalk Bank, remitting the proceeds to Carne.In 2016 when Carne repurchased the inventory, Nolan used the proceeds to repay its bank loan.
-On whose books should the cost of the inventory appear at the December 31, 2015 statement of financial position date?
A)Carne Corporation
B)Nolan Corporation
C)Norwalk Bank
D)Nolan Corporation, with Carne making appropriate note disclosure of the transaction

Quizplus · Accepted Answer

The transaction is a repurchase agreement, meaning Carne Corporation retains the risks and rewards of ownership. Therefore, the inventory should remain on Carne's books.

Use the Following Information for Questions