Recording Sales and Shipping Terms Stanley Company shipped the following merchan

Question

Recording Sales and Shipping Terms

Stanley Company shipped the following merchandise during the last week of December 2019. All sales were on credit.

Required:

1. Compute the total amount of sales revenue recognized by Stanley in December 2019.
$

2. Conceptual Connection: If Stanley included all of the above shipments as revenue, what would be the effect on Stanley's assets, liabilities, stockholders' equity, revenues, expenses, and net income for 2019? Enter all amounts as positive numbers.

Sales Price Shipping Terms Date Goods Shipped Date Goods Received $5,460 F.O.B shipping point December 27 January 3 $3,800 F.O.B destination December 29 January 5 $4,250 F.O.B destination December 29 December 31

Explanation / Answer

1.

Under FOB shipping point, title passes when goods are delivered by seller to the common carrier.

Under FOB destination, title passes when the goods are received by the buyer.

Total amount of sales revenue recognized by Stanley in December 2019 = 5,460 + 4,250 = 9,710.

2.

  

Sales revenue Overstated by 3,800 Net income Overstated by 3,800 Assets (accounts receivable) Overstated by 3,800 Stockholder's equity Overstated by 3,800 Liabilities No effect Expenses No effect

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