When an acquisition is on an FOB origin basis, the inventory and related accounts payable must be recorded in the current period if the goods were
A) received prior to the balance sheet date.
B) shipped on or before the balance sheet date.
C) both shipped and received prior to the balance sheet date.
D) paid for in advance.

Question

Quizplus · Accepted Answer

If the acquisition is on an FOB origin basis, the title and risk of loss transfer to the buyer when the goods are shipped. Therefore, if the goods were shipped on or before the balance sheet date, they should be recorded as inventory and related accounts payable in the current period, regardless of whether they have been received prior to the balance sheet date. If the goods have not been shipped by the balance sheet date, they should not be recorded as inventory or accounts payable. If the goods were both shipped and received prior to the balance sheet date, they should have already been recorded in a prior period. Prepayment of goods would not affect the timing of inventory and accounts payable recognition in the current period.

When an Acquisition Is on an FOB Origin Basis, the Inventory