[Anonymous]

I’m confused on Wiley’s explanation (again)

For inventory, freight in is part of inventoriable cost & freight out is NOT inventoriable, but instead a selling expense

so my question is this

A consignor consigns goods (40 freezers) and pays $800 in transportation costs

10 freezers are sold for $100 each

30 remain for sale by consignee

My question is this- wiley says “10/40 of the transportation cost which is 200 should become a cost of goods sold item” I thought this was a selling expense?

Also they say 30/40 or $600 is included in ending inventory.

LIke I said, the reason for confusion is I thought freight out was not inventoriable. Thanks

This is what I love about FAR all the exceptions that apply. “in-transit insurance premiums and transportation costs are inventoriable because they are necessary to get the goods to point of sale”. So this seems to be an exception where freight out IS inventoriable. Hope that helps anyone who was struggling with this apparent contradiction.

[silverblue]

I think the reason why consignment freight-out is counted as inventorial costs is because consignment inventories are not sold when goods are shipped to the consignees. The freight-out is still part of the costs trying to bring the goods ready for sale. The point of sale occurs only when the consignee sells the goods. Hope that helps!

CPA
REG 88 (5/5/12)
BEC 84 (5/26/12)
FAR 82 (7/7/12)
AUD 92 (7/14/12) - Done! 🙂

CMA
Part 1 - 5/30/2015 - 440
Part 2 - 10/31/2015 - 380 - Done! 🙂

[Author]

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