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During 2017 Ebert Corp.transferred inventory to Siskel Corp.and agreed to repurchase the merchandise early in 2018.Siskel then used the inventory as collateral to borrow from Southern Bank, remitting the proceeds to Ebert.In 2018 when Ebert repurchased the inventory, Siskel used the proceeds to repay its bank loan.
-On whose books should the cost of the inventory appear at the December 31, 2017 statement of financial position date?
A)Siskel Corp.
B)Ebert Corp.
C)Southern Bank
D)Siskel Corp., with Ebert Corp.making appropriate note disclosure of the transaction

Question

Quizplus · Accepted Answer

Since the transfer of inventory was made by Ebert Corp. to Siskel Corp., the cost of the inventory should appear on Ebert Corp.'s statement of financial position as a receivable. Siskel Corp. should record the inventory as collateral received and the bank loan as a liability. Southern Bank is not a party to the transfer of inventory and should not reflect it on their statement of financial position. Note disclosure may be necessary for Siskel Corp. to explain the transaction.

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