Asked by Writes Wanderlust on Jun 07, 2024
Verified
Emma Co. sold to Isabella Co. merchandise on account FOB shipping point, 2/10, net 30, for $15,000. Emma Co. prepaid the $750 shipping charge. Using the perpetual inventory method, which of the following entries will Isabella Co. make to record the payment for the merchandise if Isabella Co. pays within the discount period?
A) Accounts Payable-Emma Co., debit $15,000; Cash, credit $15,000
B) Accounts Payable-Emma Co., debit $15,450; Cash, credit $15,450
C) Accounts Payable-Emma Co., debit $15,000; Freight In, debit $750; Cash, credit $15,750
D) Accounts Payable-Emma Co., debit $15,750; Merchandise Inventory, debit $300; Cash, credit $16,050
FOB Shipping Point
A term indicating that the buyer assumes responsibility for the goods and shipping costs once the goods leave the seller's premises.
Perpetual Inventory
An inventory management system where updates are made continuously to reflect items added or sold, providing a real-time view of inventory levels.
Freight In
Costs associated with transporting goods into a warehouse or to a business, typically recorded as part of inventory cost.
- Establish distinctions between non-stop and cyclical inventory systems, focusing on their effect on financial accounting records.
- Understand the methodology for recording account-based sales transactions, including discounts and returns.
Verified Answer
Accounts Payable – Emma Co., debit $15,000
Freight In, debit $750
Cash, credit $15,450 ($15,000 - $300 discount + $750 shipping)
Learning Objectives
- Establish distinctions between non-stop and cyclical inventory systems, focusing on their effect on financial accounting records.
- Understand the methodology for recording account-based sales transactions, including discounts and returns.
Related questions
A Chart of Accounts for a Merchandising Business ...
Carrie Company Sold Merchandise with an Invoice Price of $1,000 ...
A Periodic Inventory System Requires a Detailed Inventory Record of ...
Under a Perpetual Inventory System the Cost of Goods Sold ...
Freight-In Is an Account That Is Subtracted from the Purchases ...