Alonzo Spellman, an inventory control specialist, is interested in better understanding the accounting for inventories. Although Alonzo understands the more sophisticated computer inventory control systems, he has little knowledge of how inventory cost is determined. In studying the records of Ditka Enterprises, which sells normal brand-name goods from its own store and on consignment through Wannstedt Inc., he asks you to answer the following questions.

Instructions
(a) Should Ditka Enterprises include in its inventory normal brand-name goods purchased from its suppliers but not yet received if the terms of purchase are f.o.b. shipping point (manufacturer’s plant)? Why?
(b) Should Ditka Enterprises include freight-in expenditures as an inventory cost? Why?
(c) What are products on consignment? How should they be reported in the financial statements?