Goods in transit

Goods in transit

1. Goods in transit
--> ownership of goods in transit is determined by the terms of shipping agreement

2. Free on board (F.O.B.) shipping point
--> ownership of goods is transferred when they are on board
--> at the departing port

3. Free on board (F.O.B.) destination
--> ownership of goods is transferred when they arrive at the destination port

4. Example 1
Entity A sold 5,000 units of goods to Entity B, with FOB shipping point
All 5,000 units of goods were shipped on December 30, 2011,
and arrived at the destination on January 5, 2012.

Which entity should report 5,000 units of goods as inventory at December 31, 2011?
Answer: Entity A

5. Example 2
Entity A sold 5,000 units of goods to Entity B, with FOB destination
All 5,000 units of goods were shipped on December 30, 2011,
and arrived at the destination on January 5, 2012.

Which entity should report 5,000 units of goods as inventory at December 31, 2011?
Answer: Entity B