Question

The following inventory transactions took place near december 31, 2024, the end of the rasul company's fiscal year-end: 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. on january 5, 2025, inventory costing $8,000 was received from a supplier and recorded as a purchase on that date and not included in the 2024 ending inventory. the invoice revealed that the shipment was made f.o.b. shipping point on december 28, 2024. on december 29, 2024, the company shipped inventory costing $12,000 to a customer f.o.b. destination. the goods, which arrived at the customer’s location on january 4, 2025, were not included in rasul's 2024 ending inventory. the sale was recorded in 2024. inventory costing $4,000 was received on december 28, 2024, on consignment from the aborn company. a purchase was not recorded and the inventory was not included in 2024 ending inventory. inventory costing $6,000 was received and recorded as a purchase on january 8, 2025. the invoice revealed that the inventory was shipped from the supplier on december 28, 2024, f.o.b. destination. the inventory was not included in 2024 ending inventory.

Which of the following inventory transactions should be included in Rasul Company's 2024 ending inventory?

A. Inventory costing $2,000 shipped to Milat Company on consignment on December 27, 2024.
B. Inventory costing $8,000 received from a supplier on January 5, 2025, but shipped on December 28, 2024.
C. Inventory costing $12,000 shipped to a customer on December 29, 2024, but not received until January 4, 2025.
D. Inventory costing $4,000 received on consignment from Aborn Company on December 28, 2024.
E. Inventory costing $6,000 received on January 8, 2025, but shipped from the supplier on December 28, 2024.

Answer 1

The inventory transactions that should be included in Rasul Company's 2024 ending inventory are inventory on consignment to Milat costing $2,000 and received inventory with F.O.B. shipping point terms costing $8,000 since ownership transferred to Rasul Company before the year's end.

Step-by-step explanation:

When determining which inventory transactions should be included in Rasul Company's 2024 ending inventory, it is essential to understand the rules for inventory recognition and the shipping terms mentioned, such as F.O.B. (Free On Board) shipping point and F.O.B. destination. Here's the breakdown:

• Consignment Inventory: Rasul shipped inventory to Milat on consignment, and the consigned inventory should remain on Rasul's books until Milat sells it. Therefore, the inventory costing $2,000 should be included in Rasul's 2024 ending inventory.
• Inventory received on January 5, 2025, costing $8,000 with shipping terms of F.O.B. shipping point on December 28, 2024, signifies that Rasul took ownership of the goods when they were shipped. This inventory should have been included in Rasul's 2024 ending inventory.
• The inventory shipped to a customer F.O.B. destination on December 29, 2024, and received by the customer on January 4, 2025, should not be included in the 2024 inventory, as the transfer of ownership occurred in 2025 when the goods reached their destination.
• Consigned inventory received from Aborn costing $4,000 on December 28, 2024, should not be included in Rasul's inventory, as it is owned by Aborn until Rasul sells it.
• Inventory received on January 8, 2025, costing $6,000 with shipping terms of F.O.B. destination, also should not be included in the 2024 inventory because the transfer of ownership occurred when the goods reached their destination in 2025.

The final answer is that Rasul Company's 2024 ending inventory should include the inventory costing $2,000 shipped to Milat Company on consignment and the inventory costing $8,000 received from a supplier on January 5, 2025, but shipped F.O.B. shipping point on December 28, 2024, because ownership was transferred to Rasul before the year-end.