Assignment

Barbara's Brownies produces different varieties of brownies that she sells to grocery, candy, and gift shops. These sales are made with the terms FOB shipping point, and she generally ships the brownies on the same day that the order is received or on the next day if necessary. The company's fiscal year end is December 31. During the last week of December Barbara takes a look at her financial reports before deciding when to ship orders received that week. If sales and profits for the month and year have been good, she may delay shipments until early January. If sales and profits have been poor, she will deliver all that she can in December.

1. With terms of FOB shipping point, when does Barbara record a sale? If she ships in January and records the sale in January has she violated any accounting rules?

2. Do you think it is ethical for Barbara to delay shipments until the next year? Why or why not? Who may be harmed by that decision?

3. What impact will delaying the recording of sales until January have on her financial statements for December and January? Who may be harmed by that decision?