Question

On December 27, 2024, inventory costing $2,000 was shipped to the Milat Company on consignment. The shipment arrived at Milat's location on December 29, but none of the inventory was sold by the end of the year. The inventory was not included in the 2024 ending inventory.

a) True
b) False
c) Not enough information to determine
d) The information is contradictory

Answer 1

The correct answer is b) False. Consigned inventory does not become part of the consignee's inventory until a sale occurs.

Step-by-step explanation:

The correct answer is b) False.

In this scenario, the consigned inventory was shipped to the Milat Company on December 27, 2024. However, since none of the inventory was sold by the end of the year, it was not included in the 2024 ending inventory.

Consigned inventory remains the property of the consignor until it is sold by the consignee. Therefore, it does not become part of the consignee's inventory until a sale occurs.

The question revolves around consignment inventory accounting practices. According to accounting principles, inventory that is shipped on consignment remains in the books of the consignor until it is sold.

In the scenario described, inventory costing $2,000 was shipped to the Milat Company on consignment and arrived on December 29, 2024. Since the inventory was not sold by the end of the year, it should still be included in the consignor’s ending inventory for 2024. Therefore, if the inventory was not included in the 2024 ending inventory, the statement is false.