Physical Inventory Count, Ownership of Goods, and Consigned Goods Video Lessons

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Problem: Frank’s Fine Furniture manufactures high quality dining room tables with matching chairs and sells these in its showroom in North Carolina. Frank decided to place 5 dining room sets on consignment with Rooms to Go, to test the market in Florida. Which of the following statements is true regarding this transaction? a. Rooms to Go should make the following entry when the furniture is received: Debit: Inventory and Credit: A/P b. Frank’s Fine Furniture should make the following entry when the furniture is shipped: Debit: A/R and Credit: Sales c. Assuming periodic inventory system, Frank should record COGS expense when Rooms to Go receives the furniture. d. No entry is required on Frank’s books or Rooms to Go’s books when the items are shipped and and received by Rooms to Go.

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Problem Details

Frank’s Fine Furniture manufactures high quality dining room tables with matching chairs and sells these in its showroom in North Carolina. Frank decided to place 5 dining room sets on consignment with Rooms to Go, to test the market in Florida. Which of the following statements is true regarding this transaction?

a. Rooms to Go should make the following entry when the furniture is received: Debit: Inventory and Credit: A/P

b. Frank’s Fine Furniture should make the following entry when the furniture is shipped: Debit: A/R and Credit: Sales

c. Assuming periodic inventory system, Frank should record COGS expense when Rooms to Go receives the furniture.

d. No entry is required on Frank’s books or Rooms to Go’s books when the items are shipped and and received by Rooms to Go.

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Based on our data, we think this problem is relevant for Professor Cainas' class at USF.