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When a physical inventory count is taken, which item should be EXCLUDED from a company's counted inventory?
AGoods held on consignment from another party
BGoods returned to the company by customers
CGoods purchased in transit shipped FOB shipping point
DGoods held aside for customers not yet paid for
Answer & Solution
Correct answer: A. Goods held on consignment from another party
1. A company includes only inventory that it owns.
2. Consignment goods received from another party are owned by that other party, not the company.
3. Therefore consignment-in goods are excluded from the count.
4. Rule out customer returns, which the company re-possesses and does own.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §4.1.4 "Physical Inventory Count", p.124_
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