Bolt Company is a clothing manufacturer.

The following items relate to transactions that occurred close to Bolt’s December 31 fiscal year-end date.

Item I: Merchandise costing $5,000 was shipped to a retail customer on December 27. The merchandise is part of a consignment agreement with the retailers. The goods were received by the retail customer on December 30 and were on the customer’s shelves and available for sale on January 2.

Item II: Merchandise costing $3,000 was shipped by Bolt to a retail customer on December 26, using FOB shipping. The merchandise was received by the retailer on January 3.

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

(a) Item I’s and Item II’s inventory should both be included in Bolt’s December 31 inventory.

(b) Item I’s inventory should be included in Bolt’s December 31 inventory, and Item II’s inventory should be excluded from Bolt’s December 31 inventory.

(c) Bolt should recognize sales in its income statement for both Item I and Item II.

(d) Bolt should not recognize a sale for either Item I or Item II.