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On June 1, year 2, Archer, Inc. issued a purchase order to Cotton Co. for a new copier machine. The machine requires one month to produce and is shipped f.o.b. destination on July 1, year 2, and is received by Archer on July 15, year 2. Cotton issues a sales invoice dated July 2, year 2, for the machine. As of what date should Archer record a liability for the machine?

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jepessoa

Answer:

The answer is: July 15, year 2

Explanation:

FOB means free on board. When a product is shipped FOB destination it means that the seller is the owner of the product until it reaches that destination. The seller is also responsible for paying the transportation fee and the product's title is not passed from the seller to the buyer until it has been delivered.  

Archer can record a liability on the machine on July 15, year 2, after the title of the machine has been passed to them.

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