Use the following information for questions
During 2007 Foley Corporation transferred inventory to Kline Corporation and agreed to repurchase the merchandise early in 2008.Kline then used the inventory as collateral to borrow from Norwalk Bank, remitting the proceeds to Foley.In 2008 when Foley repurchased the inventory, Kline used the proceeds to repay its bank loan.
-On whose books should the cost of the inventory appear at the December 31, 2007 balance sheet date?
A)Foley Corporation
B)Kline Corporation
C)Norwalk Bank
D)Kline Corporation, with Foley making appropriate note disclosure of the transaction

Question

Use the following information for questions 
During 2007 Foley Corporation transferred inventory to Kline Corporation and agreed to repurchase the merchandise early in 2008.Kline then used the inventory as collateral to borrow from Norwalk Bank, remitting the proceeds to Foley.In 2008 when Foley repurchased the inventory, Kline used the proceeds to repay its bank loan.
-On whose books should the cost of the inventory appear at the December 31, 2007 balance sheet date?
A)Foley Corporation
B)Kline Corporation
C)Norwalk Bank
D)Kline Corporation, with Foley making appropriate note disclosure of the transaction

Quizplus · Accepted Answer

The inventory was transferred by Foley Corporation to Kline Corporation, but the agreement was for Foley Corporation to repurchase the inventory in 2008. Therefore, at the December 31, 2007 balance sheet date, the inventory should still be recorded on Foley Corporation's books as it still legally owns the inventory.

Use the Following Information for Questions