Texas Inc.sold merchandise to Flange Corp.on December 28,2013,with shipping terms of FOB destination.Flange Corp.received the merchandise on January 3,2014.Which one of the following statements is true?

Question

Quizplus · Accepted Answer

Since the shipping terms were FOB destination, ownership of the merchandise did not pass to Flange Corp. until they received it on January 3, 2014. Therefore, Flange Corp. should record a liability for the purchase on January 3, 2014. Texas should not record sales revenue until Flange Corp. receives and accepts the merchandise. Flange Corp. is not responsible for transportation costs since the terms are FOB destination. Finally, Flange Corp. should not include the merchandise in its inventory at December 31, 2013, since it did not receive it until January 3, 2014.

Texas IncSold Merchandise to Flange Corp