Asked by Rachel Lopke on Jul 20, 2024
Verified
Purchased merchandise was shipped FOB shipping point on the last day of the year. The cost of the merchandise was not included in ending inventory.
FOB Shipping Point
A term indicating that the buyer takes responsibility for goods and their transportation costs once they leave the seller's premises.
Net Income
The final amount a company earns, following the deduction of all expenditures and taxes from its total revenue.
Ending Inventory
The cost of inventory on hand for selling at the conclusion of an accounting cycle.
- Perceive the influence of inventory discrepancies on net profitability.
Verified Answer
PS
PBRH SURAYA BINTI MISLANJul 26, 2024
Final Answer :
b
Explanation :
Since the merchandise was shipped FOB shipping point, it should be included in the buyer's inventory once shipped. If the cost of the merchandise was not included in the ending inventory, expenses (cost of goods sold) are overstated, and as a result, net income is understated.
Learning Objectives
- Perceive the influence of inventory discrepancies on net profitability.