5.5 Understand shipping terms, and journalize transactions for freight charges and other selling expenses
1) FOB destination means that title passes at the time of shipment of the product to the buyer from the seller.
2) FOB shipping means that title passes at the time the product is shipped from the seller.
3) A buyer debits the shipping charges that they pay for merchandise purchased to inventory under the perpetual inventory system.
4) Advertising and promotion are examples of selling expenses.
5) Freight charges that are paid by a buyer are:
A) added to Cost of Goods Sold.
B) added to Inventory.
C) subtracted from Inventory.
D) subtracted from Cost of Goods Sold.
E) added to operating expense.
6) Transferring title refers to a:
A) change of ownership.
B) change of buyer.
C) change of seller.
D) legal document.
E) purchase contract.
7) When a company repays the seller for shipping costs on an FOB shipping 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 cost.
E) The shipping costs are not added to the cost of the inventory.
8) What type of expense is depreciation of a delivery truck?
9) What does the acronym FOB stand for?
10) What is the term used to indicate that the buyer pays all of the shipping and freight costs?