Please answer the following 4 questions for me briefly but explicitly.
Since inventory is so important, let’s discuss how a business determines what amount should be reported as inventory on its balance sheet. (we are NOT yet talking about FIFO, LIFO here.)
- For example, if your U.S.-based business has some inventory in Germany, do you include it on your balance sheet or exclude it because it is not in your possession?
- If you are an agent of a company located in Japan and are holding some inventory of washers and dryers for that company, who reports that as inventory? You or the Japanese company? Why?
- If you have ordered some inventory from Brazil, and on the balance sheet date the inventory is still in transit, who reports it…you or the seller of the inventory? Why, or why not? How do you decide?
- If the ship carrying the inventory in transit sinks, who has to take the loss…..the buyer or the seller of the inventory?
