What is the appropriate treatment for goods held on consignment?
A. The goods should be included in cost of goods sold of the consignee only when sold.
B. The goods should be included in ending inventory of the consignor.
C. The goods should be included in ending inventory of the consignee.
D. The goods should be included in cost of goods sold of the consignor when transferred to the consignee.
Answer:B
Choice "B" is correct. While an agent (consignee) will hold and sell goods on behalf of the consignor, until the inventory is sold, the seller (consignor) will include in his/her inventory because title and risk of loss are retained by the consignor.
Choice "C" is incorrect. The consignor will count the inventory in his/her ending inventory.
Choice "A" is incorrect. The goods should be included in the COGS of the consignor only when sold.
Choice "D" is incorrect. When the goods are sold to a third party, then the consignor will include them in COGS.
