[JessF]

A student of mine that I tutor brought in a Consignment question for me today. I had been reviewing Consignment for FAR next month, so I was like awesome, we’ll nail this one.

Here was the question:

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Second Chance Clothing (SCC) obtains goods on consignment and through purchases and sells them to others. The following events occur:

(a) On Nov. 2, SCC receives goods on consignment from Apparel Co.

(b) On Oct 31, SCC receives goods on consignment from Apparel Co.

(c) Goods in transit to SCC were shipped by Shoe, Inc. on Oct 31, FOB shipping point.

(d) Goods in transit to SCC were shipped by Shoe, Inc. on Oct 31, FOB destination.

Determine whether each item should be included in SCC’s inventory balance on Oct 31.

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What am I missing here? I would put no, no, no, and no because goods on consignment should not be included in the Cosignee’s inventory. But that seemed almost too easy, and the textbook didn’t seem like it was trying to throw a trick question out there. Am I wrongfully second guessing myself?

BBA Accounting 12/2013
FAR - July 2015
BEC - Aug 2015
REG
AUD

Gleim

[taxgeek83]

My understanding is the same as yours I think – no to all four. The text may just be alerting you to the different situations in which consignment inventory may be obtained by a consignee, and ultimately teaching you that at no time will the consignee include in inventory goods received from a consignor.

[MaLoTu]

a and b specifically call out consignment, whereas c and d just state goods … So, I am guessing c would be included in inventory since it says “obtains goods on consignment and through purchases”.

There is no solution in the textbook?

[Gabe]

I would agree and say C may be included because it does not state it is consignment.

AUD: 84
BEC: 76
FAR: 81
REG: 4/3/15

OK Candidate

[taxgeek83]

Aahh I totally missed the part where they obtain goods through purchase…read the question, taxgeek…. 😉

[MaLoTu]

Unfortunately, this is the type of question the examiners love, lol … it is not written so great and leads you to second guess yourself!

[Author]

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