Texas Inc.sold merchandise to Fagin Corp.on December 28, 2016, with shipping terms of FOB destination.Fagin Corp.received the merchandise on January 3, 2017.Which one of the following statements is true?

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Quizplus · Accepted Answer

FOB destination means that the seller is responsible for the goods until they reach their destination, which is Fagin Corp.'s location in this case. Therefore, Texas Inc. should not record sales revenue until the merchandise is received by Fagin Corp. on January 3, 2017. Fagin Corp. should include the merchandise in its inventory on January 3, 2017, when it is received. Since the shipping terms are FOB destination, Texas Inc. should pay for the transportation costs. However, Fagin Corp. does not need to record a liability for the purchase because the transaction is complete once the merchandise is received.

Texas IncSold Merchandise to Fagin Corp