Question

Which of the following would not be included in the year-end inventory for Kristin's Boutiques on December 31?

1) Kristin has sent merchandise to various retailers on a consignment basis.
2) Merchandise purchased FOB shipping point was picked up by the freight company but had still not arrived at Kristin's Boutique as of December 31.
3) Kristin has inventory on hand that has been returned by customers because of wrong size.
4) Kristin has in its warehouse merchandise on consignment from Abby Co.

Answer 1

The merchandise in Kristin's warehouse on consignment from Abby Co. would not be included in Kristin's Boutiques' year-end inventory, as Kristin does not own this inventory.

Step-by-step explanation:

Understanding Year-End Inventory

Year-end inventory refers to the goods available for sale at the end of the accounting period. When assessing what would not be included in Kristin's Boutiques' year-end inventory on December 31, we need to understand how inventory is recognized.

• Merchandise sent on a consignment basis means that ownership hasn't transferred to the consignee. Therefore, these items would still be part of Kristin's Boutique's inventory.
• FOB shipping point indicates that ownership transfers to the buyer when the goods are shipped. As it had not arrived yet, it would be included in the year-end inventory.
• Merchandise returned by customers due to wrong size is part of the inventory if it is returned before December 31.
• Goods received on consignment from other companies, like Abby Co., are not owned by Kristin’s Boutique and therefore would not be included in Kristin’s year-end inventory.

In conclusion, the merchandise that Kristin has in its warehouse on consignment from Abby Co. would not be included in the year-end inventory of Kristin's Boutiques as of December 31.