Asked by Kevin Kamtapersaud on Jun 29, 2024
Verified
On October 31, Janoch's Dog Kennel purchased $900 of merchandise on account from the Ganster Company. The goods were shipped F.O.B. shipping point. The freight charge of $110 was paid by Ganster Company and added to the invoice. The amount to record in the Merchandise Inventory account is:
A) $900.
B) $1,010.
C) $790.
D) $780.
F.O.B. Shipping Point
A shipping term indicating that the buyer takes ownership and responsibility for goods once they are shipped, and is responsible for shipping costs.
Merchandise Inventory
Goods that a company intends to sell to customers that are considered as current assets on the balance sheet.
Freight Charge
The cost associated with the transportation of goods from one place to another.
- Understand the function of goods inventory within accounting practices and its customary equilibrium.
- Comprehend the terms affiliated with shipping and their implications for freight expenses and the conveyance of title.
Verified Answer
JB
Jesus BautistaJul 02, 2024
Final Answer :
B
Explanation :
The amount to record in the Merchandise Inventory account is $1,010 because it includes the cost of the merchandise ($900) plus the freight charges ($110) paid by the Ganster Company, which were added to the invoice. Since the goods were shipped F.O.B. shipping point, the buyer (Janoch's Dog Kennel) takes ownership at the shipping point, and thus, the shipping cost is part of the inventory cost.
Learning Objectives
- Understand the function of goods inventory within accounting practices and its customary equilibrium.
- Comprehend the terms affiliated with shipping and their implications for freight expenses and the conveyance of title.