linc asked:
SHIN COMPANY sells sports equipment under terms of FOB shipping point. The company usually receives orders for sales approximately one week before shipping inventory to customers. For orders received late in December, John Shin, the owner, decides when to ship the goods. If profits are already at an acceptable level, John delays shipment until January. If profits for the current year are lagging behind expectations, John ships the goods during December. The company’s accounting period ends on December 31.
SHIN COMPANY sells sports equipment under terms of FOB shipping point. The company usually receives orders for sales approximately one week before shipping inventory to customers. For orders received late in December, John Shin, the owner, decides when to ship the goods. If profits are already at an acceptable level, John delays shipment until January. If profits for the current year are lagging behind expectations, John ships the goods during December. The company’s accounting period ends on December 31.
1.Under John’s FOB policy, when should the company record a sale?
2.Do you approve or disapprove of John’s manner of deciding when to ship goods to customers and record the sales revenue? If you approve, give your reason. If you disapprove, identify a better way to decide when to ship goods. (There is no accounting rule against John’s practice).
Kenny
