Anstead Co. is experiencing a decrease in sales and operating income for the fis

Question

Anstead Co. is experiencing a decrease in sales and operating income for the fiscal year ending October 31, 2014. Ryan Frazier, controller of Anstead Co., has suggested that all orders received before the end of the fiscal year be shipped by midnight, October 31, 2014, even if the shipping department must work overtime. Since Anstead Co. ships all merchandise FOB shipping point, it would record all such shipments as sales for the year ending October 31, 2014, thereby offsetting some of the decreases in sales and operating income. Discuss whether Ryan Frazier is behaving in a professional manner.

Explanation / Answer

In the give case Sale of goods is made on October 31, 2014 with FOB shipping terms. Hence this should be recorded as sales in the books when it reached to the buyer. Ryan has suggested to ship all the goods by midnight and to include in sales to increase the Sales and operating income.

This is not a fair practice, because these goods should be considered sales for next period as they will be actually shipped after October 31 .

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