If the Shipping Terms Are FOB Shipping Point and the Freight

question 87

Multiple Choice

If the shipping terms are FOB shipping point and the freight bill is $200, the purchaser, using a perpetual inventory system would record payment of the freight with a debit to:

• A)Inventory and credit to Cash for $200.
• B)Accounts Payable and credit to Inventory for $200.
• C)Inventory and credit to Purchases Discounts for $200.
• D)Purchases Discounts and credit to Inventory for $200.

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Definitions:

Depreciation Expense

An accounting method of allocating the cost of a tangible asset over its useful life, representing how much of the asset's value has been used up over a period.

Fixed Costs

Costs that do not vary with the level of production or sales, remaining constant regardless of the business activity level.

Contribution Margin

The selling price per unit, minus the variable cost per unit, indicating how much of each sale contributes to covering fixed costs.

Rapidly Changing Technology

Rapidly changing technology refers to the swift advancement in technological innovations and developments that can significantly affect industries and markets.