Question

roadway company purchases inventory from fedway company with the shipping terms fob destination. this means that: a. fedway company will count the inventory as an asset until roadway receives the goods. b. roadway company owns the goods while they are in transit. c. roadway company will include the goods in their inventory as soon as they leave fedways shipping dock. d. legal title passes to roadway company when the goods leave fedways shipping dock.

Explanation:

To solve this, we analyze FOB destination terms:

• FOB destination means the seller (Fedway) retains ownership and asset recognition until the buyer (Roadway) receives the goods.
• Option A: Fedway (seller) holds the inventory as an asset until Roadway (buyer) receives it. This matches FOB destination rules.
• Option B: In FOB destination, the buyer does not own goods in transit (seller does), so B is wrong.
• Option C: Roadway should not include goods in inventory when they leave Fedway’s dock (that’s FOB shipping point), so C is wrong.
• Option D: Legal title passes at delivery (not when goods leave seller’s dock) for FOB destination, so D is wrong.

Answer:

A. Fedway Company will count the inventory as an asset until Roadway receives the goods.