Are the articles of secondhand clothing offered for sale on thredUP’s online store included in inventory on thredUP’s balance sheet?

ThredUP is a startup online consignment and thrift store. Consumers can buy like-new, carefully vetted brand-name clothing from thredUP’s online store at discounts of up to 80% off of the original retail prices.

Consumers can also send in their unwanted clothing articles for thredUP to resell.  ThredUP’s professional buyers go through the articles of clothing sent in and assess the salability of those items.  ThredUP only accepts certain brand names of clothing, including brands like Adidas, Ann Taylor, Kate Spade New York, and Lululemon Athletica. Items must also be in new or like-new condition.  When thredUP accepts an article of clothing to list on its online store, one of two things will happen:

  1. If the clothing article will be listed on the thredUP website for under $60, the original owner (seller) will receive an immediate payout from thredUP (via store credit or cash through PayPal.)
  2. If the item will be listed on the thredUP website for more than $60, the item is accepted on consignment and the payout to the original owner will occur once the item sells. A consigned item can be reclaimed by the owner after it is listed on thredUP’s website. After 98 days on the website, if the item has not sold and has not been reclaimed by the original owner, the item becomes the property of thredUP.

If clothing articles do not measure up to thredUP’s standards, the items are returned to the original owner if he/she has indicated that he/she wants to have the items returned.  Otherwise, thredUP will either sell the unaccepted items to third party sellers or pass them onto textile recyclers to be upcycled.

Questions

  1. Assume that a J. Crew long sleeve button-down shirt that originally cost $88 is sent into thredUP. This shirt is examined by a professional buyer for thredUP, who determines that the item should be listed on thredUP’s website at a selling price of $21.99 and that the original owner (the seller) should receive $3.50 for the item.  Once thredUP accepts the J. Crew shirt, who owns it – thredUP or the original owner? Whose balance sheet should that J. Crew shirt be shown on and at what dollar value?
  2. Now assume that a Saks Fifth Avenue trenchcoat that originally cost $340 is sent into thredUP. This trenchcoat is examined by a professional buyer for thredUP, who determines that the item should be listed on thredUP’s website at a selling price of $92.99 and that the original owner (the seller) should receive $15.99 for the item when it sells.  Once thredUP lists the Saks Fifth Avenue trenchcoat on its website, who owns it – thredUP or the original owner? Whose balance sheet should that trenchcoat be shown on and at what dollar value? When, if ever, does ownership of that trenchcoat transfer to thredUP?

Instructor Resources

These resources are provided to give the instructor flexibility for use of Accounting in the Headlines articles in the classroom. The blog posting itself can be assigned via a link to this site OR by distributing the student handout below. Alternatively, the PowerPoint file below contains a bullet point overview of the article and the discussion questions.

  • Student handout (pdf) (word) (contains entire blog posting + discussion questions)
  • PowerPoint file (brief article overview + discussion questions)

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 3.0 Unported License.

About Dr. Wendy Tietz, CPA, CMA, CGMA

Dr. Wendy Tietz is a professor of accounting at Kent State University in Kent, Ohio, USA. She is also a textbook author with Pearson Prentice-Hall.

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