Question

Over/Under: Beta sold merchandise on credit with terms FOB Destination. By the end of the year, the merchandise had not been received by the customer. Beta recorded the sale and did not count the merchandise in its ending inventory. Beta uses the perpetual inventory system. This has what effect on assets, liabilities, and net income? Assets: Understated , overstated , no effect ? Liabilities: Understated , overstated , no effect ? Net Income: Understated , overstated , no effect ?

          Over/Under: 
Beta sold merchandise on credit with terms FOB Destination. By the end of the year, the merchandise had not been received by the customer. Beta recorded the sale and did not count the merchandise in its ending inventory. Beta uses the perpetual inventory system. This has what effect on assets, liabilities, and net income?
Assets: Understated , overstated , no effect ? 
Liabilities: Understated , overstated , no effect ? 
Net Income: Understated , overstated , no effect ?

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Added by Aitor B.

Horngren’s Cost Accounting

Srikant M. Datar, Madhav V. Rajan 16th Edition

Instant Answer

Solved by Expert Akash M

09/11/2023

Step 1

Since the terms are FOB Destination, the ownership of the merchandise does not transfer to the customer until it is received by them. Therefore, Beta should not recognize the sale until the customer has received the merchandise. Show more…

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Over/Under: Beta sold merchandise on credit with terms FOB Destination. By the end of the year, the merchandise had not been received by the customer. Beta recorded the sale and did not count the merchandise in its ending inventory. Beta uses the perpetual inventory system. This has what effect on assets, liabilities, and net income? Assets: Understated , overstated , no effect ? Liabilities: Understated , overstated , no effect ? Net Income: Understated , overstated , no effect ?

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