@AmyMc 

Forgive me if you know this already.  Drop-ship items are never inventory to you because you don't own the items - the drop-shipper does.  And, from an accounting standpoint, there is no way to add a drop-shipped item to inventory without making a false credit entry to offset the inventory debit in the company's books.   Normally, you would offset the inventory debit (increase) with a corresponding A/P credit (increase) if you're on terms with the vendor, a cc liability credit (increase) if you pay with a cc, or a cash credit (decrease) if you pay cash.  But, none of those happen in the case of drop-shipping.  IMO, drop-ship items should be set up as a non-inventory part.  Revenue is recorded on the invoice when sold and the expense is recorded on the bill when the drop-shipper bills you.