In short
Free on board (FOB) shipping terms decide when ownership of goods in transit passes from seller to buyer. Under FOB shipping point it passes when the goods are shipped; under FOB destination, when they arrive.
Key takeaways
- Goods in transit at year-end under FOB shipping point belong in the buyer's inventory.
- Under FOB destination they remain the seller's inventory, and the sale isn't recorded until delivery.
- Consigned goods belong to the consignor regardless of where they are held.
Where it's tested
FAR: Inventory — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A company uses LIFO for both tax and financial reporting. During a period of rising prices, which of the following is true relative to FIFO?