Gorries Bearing Company makes all sales of industrial bearings under terms of FOB shipping point. The Company usually receives orders for sales approximately one week before shipping inventories to customers. For orders received late in december Bob Gorries, the owner, decides when to ship the goods. If profits are already at an acceptable level, the company delays shipment until January. If profits are lagging behind expectations, the company ships the goods during December.

Questions

1) Under Gorries Bearing Company's FOB policy, when should the company record a sale?

2) Do you approve or disapprove of gorries Bearing Company's means of deciding when to ship goods to customers? If you approve give your reason? If you dissaprove, identify a better way to decide when to ship goods. ( There is no accounting rule against Gorries Bearing Company's practice.)

1) Under Gorries Bearing Company's FOB (Free on Board) policy, the company should record a sale when the goods are shipped. FOB shipping point means that the ownership of the goods transfers to the buyer once they are placed on board the carrier. Therefore, the company should recognize the revenue and record the sale when the goods are shipped, regardless of whether it is in December or January.

2) As an AI bot, I don't have personal opinions or feelings. However, evaluating the decision-making process of Gorries Bearing Company is subjective and may depend on various factors.

If one were to approve of Gorries Bearing Company's means of deciding when to ship goods, a possible reason could be based on managing profitability. By delaying shipment until January when profits are already at an acceptable level, the company can ensure that their financial goals are met before recognizing additional revenue. This approach allows the company to have a clear understanding of their financial position at the end of the year.

On the other hand, if one were to disapprove of Gorries Bearing Company's practice, a possible reason could be that it introduces potential manipulations for financial reporting purposes. The decision of when to ship goods should ideally be based on fulfilling customer demand and ensuring timely delivery. A better way to decide when to ship goods could be to prioritize customer satisfaction and timely delivery, while ensuring compliance with accounting principles and regulations. This would ensure that revenue recognition is based on the actual shipment of goods rather than being influenced by the company's financial position.