Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition

EXERCISE 6-1

Purpose:

(L.O. 1) This exercise will review how to determine (1) the owner of goods in transit and (2) the owner of goods on consignment at a balance sheet date.

As an auditor for Ryan's Art Company, you discover the following facts when auditing the client's inventory balance as of December 31, 2014.

1. Ryan's Art received goods on January 2, 2015. The goods had been shipped FOB shipping point on December 27, by Wells Company.
2. Ryan's Art received goods on January 4, 2015. The goods had been shipped FOB destination on December 28 by Nanula Company.
3. Ryan's Art sold goods to O'Toole Company on December 29, 2014. The goods were picked up by the common carrier on that same date and shipped FOB shipping point. They were expected to arrive at the buyer's business as early as January 3, 2015.
4. Ryan's Art sold goods to Matheson Company on December 31, 2014. The goods were picked up by the common carrier on that same date and shipped FOB destination. They were expected to arrive at the buyer's store as early as January 2, 2015.
5. Ryan's Art is the consignor for a collection of prints. The prints are hanging in the showroom of Decorator's Den.
6. Ryan's Art is the consignee for some goods on consignment from European Collectibles.

Instructions

For each situation above, indicate whether or not the goods being described should be Included In or Excluded From the amount to be reported for inventory on the balance sheet for Ryan's Art at December 31, 2014. Also, briefly explain your ...