MacPC Inc., is a direct marketer of computer hardware, software, peripherals, and electronics. In a recent annual report, the company reported that its revenue is recognized upon receipt of the product by the customer and that its inventory include goods in transit to customers.
Required:
1. Indicate whether MacPC Inc.'s sales terms are FOB shipping point or FOB destination.
2. Assume MacPC sold inventory on account to eCOST.com on December 28, 2013, which was to be delivered January 3, 2014. The inventory cost MacPC $25,000 and the selling price was $30,000. What amounts, if any, related to this transaction would be reported on MacPC's balance sheet and income statement in 2013? In 2014?
3. MacPC placed inventory on consignment with one of its customers. Would this inventory have been reported on the balance sheet of MacPC or of its customer? Explain your answer.
4. Assume MacPC purchased electronics on December 29, 2013, that were received on January 2, 2014. Would these goods be included in MacPC's inventory on December 31, 2013, under FOB destination or FOB shipping point? Explain your answer.