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Howard Incorporated is doing inventory. In the inventory process, Howard inadvertently miscategorized a $6,000 shipment of FOB destination goods in transit from a supplier as FOB shipping point. How will this miscategorization impact Howard’s total inventory?

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jepessoa

Answer:

It will incorrectly overestimate Howard's inventory by $6,000

Explanation:

When a company purchases using FOB shipping point, the title of the goods is transferred immediately after the goods leave the suppliers warehouse or shipping dock. When you use FOB destination point, the title of the goods is transferred only once the goods have been delivered.

When you use FOB destination, you must record the value of the goods in the inventory after receiving them.

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