Ace Company is a manufacturer of electrical appliances. The following transaction occurred near Ace Company’s December 31 fiscal year-end date:

A packing case containing products costing $10,000 was found in Ace’s branch office warehouse when the physical inventory count was taken on December 31.

The case was labeled: “Hold for shipping to customer on January 5.” The shipping documents show that the sale to Ace’s customer is “FOB Shipping.”

For the preparation of Ace’s December 31 financial statements, which of the following is correct?

(a) The packing case should not be included in Ace’s December 31 inventory balance. Ace should recognize a sale in respect of the inventory’s selling price.

(b) The packing case should be included in Ace’s December 31 inventory. Ace should recognize a sale in respect of the inventory’s selling price.

(c) The packing case should be included in Ace’s December 31 inventory. Ace should not recognize a sale in respect of the inventory’s selling price.

(d) The packing case should not be included in Ace’s December 31 inventory.

Ace should not recognize a sale in respect of the inventory’s selling price.