Fy World sold $24,000 of merchandise to Chase Liquidators on December 23, terms FOB destination. This shipment is still in transit on 12/31, Wally's year-end.

Will Wally record revenue for this transaction on its 12/31 income statement?

A. Half of the performance obligations have been met, as the items have shipped, so Wally can realize half of the revenue related to this transaction, or $12,000.

B. Yes, Wally has satisfied the performance obligation and can record revenue of $24,000.

C. There is not enough information to determine the amount of revenue Wally should recognize.

D. No, no revenue is recorded for items shipped FOB destination until those items reach the buyer.

Question

Boyer

Business

9 January, 22:49

Fy World sold $24,000 of merchandise to Chase Liquidators on December 23, terms FOB destination. This shipment is still in transit on 12/31, Wally's year-end.

Will Wally record revenue for this transaction on its 12/31 income statement?

A. Half of the performance obligations have been met, as the items have shipped, so Wally can realize half of the revenue related to this transaction, or $12,000.

B. Yes, Wally has satisfied the performance obligation and can record revenue of $24,000.

C. There is not enough information to determine the amount of revenue Wally should recognize.

D. No, no revenue is recorded for items shipped FOB destination until those items reach the buyer.

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Answers (1)

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Marely · Answer 1

No, no revenue is recorded for items shipped FOB destination until those items reach the buyer.

Explanation:

In this scenario the buyer has not received the good so ownership has not transferred hands. According to shipping FOB terms, till the buyer actually recieves the goods they are technically still the property of FY world.

So Wally will not be able to record revenue against this sale. Rather he will still recognise the merchandise as part of the companie's inventory.

When the buyer recieves the goods he can now record the revenue from the sale.