On December 23, 2010, Miller Wholesalers ships merchandise to Michael Retailers with terms of FOB destination point. The merchandise arrives at Michael’s warehouse on January 3, 2011.
Required
1. Identify who pays to ship the merchandise.
2. Determine whether the inventory should be included as an asset on Michael’s December 31, 2010, balance sheet. Should the sale be included on Miller’s 2010 income statement? Explain.
3. Explain how your answers to part (2) would have been different if the terms of shipment had been FOB shipping point.