Transportation Costs: The costs of delivering the merchandise inventory from the manufacturer to the buyer are termed as transportation cost and are differentiated on the basis of terms of the payment of transportation charges or freight by the buyer or the seller.
FOB (Free on Board) Shipping point means that the buyer pays all costs incurred for the delivery of goods once the goods is left from the supplier’s warehouse.
FOB (Free on Board) Destination means that the buyer pays all costs incurred for the delivery of goods once the goods is delivered at buyer receiving point.
To Describe: Who bear the freight charges at the time of (a) FOB shipping point, and (b) FOB destination.
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Chapter 5 Solutions
Financial & Managerial Accounting
- Which statement and where on the statement is freight-out recorded? Why is it recorded there?arrow_forwardDistinguish between FOB shipping point and FOB destination. Identify the freight terms that will result in a debit to Inventory by the purchaser and a debit to Freight-Out by the seller.arrow_forwardDetermine the amount to be paid or collected as may be the case, applying the freight terms, discounts and transportation arrangement. thank you!arrow_forward
- Distinguish between FOB Shipping Point and FOB Destination. Identify the freight terms that will result in a debit to Inventory and which one will result in a debit to Freight expenses by the seller.arrow_forwardWhich freight is capitalizable or inventoriable cost by the consignor on the consigned goods under consignment sales? a. Freight from consignee to final consumers b. Freight from consignor to consignee c. Freight from consignee to consignor d. All of the abovearrow_forwardFOB SHIPPING POINT, who is the owner of goods in transit?arrow_forward
- Explain the implications relating to ownership when goods are: In Transit (FOB) Shipping Point In Transit (FOB) Destination On Consignmentarrow_forwardThe buyer should be responsible for the freight (legally) but the seller paid for it A. FOB shipping point, freight prepaid B. FOB shipping point, freight collect C. FOB destination, freight prepaid D. FOB destination, freight collectarrow_forwardIt is used to who is responsible for paying shipping and when the title of the goods passes from seller to buyer: This term will be applicable to a. Discount term b. Credit terms c. Cash term d. Shipping termsarrow_forward
- Which freight is capitalizable or inventoriable cost by the consignor on the consigned goods under consignment sales? Freight from consignor to consignee Freight from consignee to consignor Freight from consignee to final consumers All of the abovearrow_forwardExplain the difference between freight in and freight out. Who pays for each? Who owns the goods while they are in transit? What type of account is freight in? What type of account is freight out?arrow_forwardIf the seller assumes the entire cost of transportation, without any reimbursement from the buyer, the freight terms are considered ______________. a. FOB shipping point b. FOB destination c. Freight in d. Freight out e. FOB freightarrow_forward
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