ABC Company purchased $10,000 of merchandise on account from XYZ Company; terms
ID: 2540055 • Letter: A
Question
ABC Company purchased $10,000 of merchandise on account from XYZ Company; terms are 3/10, n/30, FOB shipping point. If both companies use a periodic inventory system, which company records the transportation, and which account is debitied to record the amount of the transportation? ABC records with a debit to Delivery Expense XYZ records with a debit to Freight-In XYZ records with a debit to Delivery Expense ABC records with a debit to Freight-In ABC records with a debit to Merchandise Inventory XYZ records with a debit to Merchandise Inventory
Explanation / Answer
If Freight is paid under FOB shipping point terms then it means Freight in paid by Buyer so in this Case Buyer is ABC company so ABC company records transporation cost and ABC company uses periodic method so for transportation cost ABC company debit Freight in accounts.
so answer is ABC records with a debit to Freight-In