[CheriNC]

I understand Good on Consignment are still owned by the consignor, but a question on a final exam has several of us puzzled. The question reads..

Goods on consignment are:

1. included in the consignees' inventory (don't think so)
2. excluded from the consignor's inventory ( suppose to be included from what I read)
3. effectively owned by the consignee ( this is the only logical, but ownerhip I understand still belongs to consignor)
4. recorded in a Consignment In account, that is an inventory account (never heard of this, only that consignments are footnoted in a financial statement)
5. recorded in a Consignment Out account, that is an inventory account (again never found anything about such a thing)

What is the correct answer? Does Effectively have a different meaning other than ownership in that the consignee is effectively responsible to take care of the goods?

THANKS! :confused:

[Rina _4]

I understand Good on Consignment are still owned by the consignor, but a question on a final exam has several of us puzzled. The question reads..

Goods on consignment are:

1. included in the consignees' inventory (don't think so)
2. excluded from the consignor's inventory ( suppose to be included from what I read)
3. effectively owned by the consignee ( this is the only logical, but ownerhip i understand still belongs to consignor)
4. recorded in a Consignment In account, that is an inventory account (never heard of this, only that consignments are footnoted in a financial statement)
5. recorded in a Consignment Out account, that is an inventory account (again never found anything about such a thing)

What is the correct answer? Does Effectively have a different meaning other than ownership in that the consignee is effectively responsible to take care of the goods?

THANKS!!:confused:

When the item(s) are on consignment, it means when they are sold you get your money. I store should carry insurance just in case something happens. All inventory should be covered by the insurance including the items under consignment. To be sure, you can contact a lawyer and ask.





The #4 answer is correct.

[CheriNC]

When the item(s) are on consignment, it means when they are sold you get your money. I store should carry insurance just incase some thing happens. All inventory should be covered by the insurance including the items under consignment. To be sure, you can contact a lawyer and ask.

I understand what you are saying, and agree, but I need to select one of the 5 answers shown in my question for the final exam and none seem to make sense.

[Rina _4]

The number 4 answer is correct.

[brianboy]

I would have to disagree, I believe the correct answer should be No. 5, that the cost of goods held are recorded in a Consignment Out account which is an inventory account.

Per textbook Intermediate Accounting, 12th Edition: "Goods out on consignment remain the property of the consignor...Occasionally, and only for a significant amount, the consignor shows the inventory out on consignment as a separate item...The consignee makes no entry to the inventory account for goods received...In fact, the consignee should be extremely careful not to include any of the goods consigned as part of inventory."

If this holds true the only entity who would record a "Consignments In" would be the consignee, not the consignor, making No. 5 incorrect. So No. 5, I think, should be the correct answer.

[brianboy]

Sorry, correction on the last part, making No. 4 incorrect. So No. 5, I think, should be the correct answer.