Grey Manufacturing had the following transaction:
.Grey ordered $67,000 of inventory on December 30, 2017. The inventory was shipped on December 31, 2017, with the terms FOB destination. Grey received the inventory on January 3, 2018.
If Grey included all these items in it ending inventory of 12/31/17, which of the following is the best statement regarding this treatment?

Question

Quizplus · Accepted Answer

Since the terms were FOB destination, ownership and risk of loss did not pass to Grey until it received the inventory on January 3, 2018. Therefore, Grey should not have included the items in its ending inventory for 12/31/17. By doing so, Grey overstated its ending inventory and subsequently overstated its net income for the period.

Grey Manufacturing Had the Following Transaction