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Unformatted text preview: hat costs are included/excluded?
- General rule: Include all costs needed to get the item
ready for sale. - Cost of the goods: - Shipping (freight) costs (from buyer’s perspective) YES ✓ F.O.B. destination: NO ✓ F.O.B. shipping point: YES Purchasing Inventory Example
On January 1 we purchase 100 items on account at $5/item.
We receive the items on January 3. Shipping costs are $50
(paid with cash). Record this transaction if shipping is:
1) F.O.B. destination
2) F.O.B. shipping point Purchasing Inventory
• What costs are included?
- Discounts and returns
✓ Clyde Company purchases $10,000 worth of inventory
on credit. Two days later, Clyde returns $200 of the
inventory because it is damaged. The purchase
contract states 5/10, n/30. Record these events if:
- Clyde pays 9 days after purchasing the goods. - Which of the journal entries that you recorded would
change if Clyde pays 11 days after purchasing the
goods? Illustration 6-24 Illustration 6-24 Net sales
Cost of goods sold
Gross profit Inventory $12,000
$ 3,954 Inventory..........
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- Spring '08