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Q1E_1.

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Financial & Managerial Accounting
Found in: Page 262

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Short Answer

At year-end, Harris Co. had shipped $12,500 of merchandise FOB destination to Harlow Co. Which company should include the $12,500 of merchandise in transit as part of its year-end inventory?

Harris Co. will include the merchandise in transit in its year-end inventory.

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Step by Step Solution

Step 1: Definition of Inventory

A line item of the financial statement reflecting the finished goods, semi-finished goods, and raw materials still owned by the business entity is inventory.

Step 2: Company Reporting Inventory

Since the merchandise is transferred on terms of FOB destination, Harris Co. will hold ownership until the merchandise reaches the place of Harlow Company. Therefore, Harris Co.’s balance sheet will include an inventory of $12,500.

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