When a Company Repays the Seller for Shipping Costs on an FOB

question 4

Multiple Choice

When a company repays the seller for shipping costs on an FOB shipping point transaction, which of the following is TRUE?

• A)A purchase discount can still be taken net of the prepaid shipping charges.
• B)A purchase discount can still be taken on the gross amount of the invoice.
• C)A purchase discount cannot be taken when shipping charges are prepaid.
• D)The shipping costs do not affect the invoice value.

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Definitions:

Profitable Projects

Projects that generate a financial gain or benefit exceeding their costs and investments.

Investment Centres

Divisions or units within an organization that are responsible for generating returns on the assets invested in them.

Residual Income

The amount of net income left over for a business after it has paid out dividends to its shareholders, often used as a measure of corporate and project profitability.

Investment Turnover

A financial ratio comparing the sales revenue a company generates to its current investment in assets, indicating efficiency in using investments to produce sales.