question archive Ashton agrees to purchase certain inventory items from Duart

Ashton agrees to purchase certain inventory items from Duart

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Ashton agrees to purchase certain inventory items from Duart. Duart is to ship the goods FOB destination. At Ashton's fiscal year-end, Duart called to say that the goods had been shipped and Ashton could expect to receive them within a week. Which of the following is correct?

a. Ashton should include the goods in inventory.

b. Ashton should not include the goods in inventory.

c. Ashton may optionally include the goods in inventory.

d. Ashton may optionally exclude the goods from inventory.

e. None of these.

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The answer is b. Ashton should not include the goods in inventory.

 

Under FOB Destination, the owner of the goods in transit is still the seller until the goods is received by the buyer. Under FOB Shipping point, the goods in transit is already owned by the buyer once shipped.