With regard to the accounts used to record freight costs,
Freight-out is a contra account to Sales.
Freight-out is added to cost of goods sold.
Freight-out has a normal balance of credit
Freight-out is recorded when freight terms are FOB shipping point.
With regard to the accounts used to record freight costs,
Freight-out is a contra account to Sales.
Freight-out is added to cost of goods sold.
Freight-out has a normal balance of credit
Freight-out is recorded when freight terms are FOB shipping point.
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At the beginning of 2013, the Bradley Company had the followingbalances in its accounts:
Cash $8,600
Inventory $2,600
Common Stock $8,100
Retained Earnings $3,100
| During 2014, thecompany experienced the following events: |
| 1. | Purchased inventory that cost $6,100 on account from BivinsCompany under terms 2/10, n/30. The merchandise was delivered FOBshipping point. Freight costs of $560 were paid in cash. |
| 2. | Returned $350 of the inventory that it had purchased because theinventory was damaged in transit. The seller agreed to pay thereturn freight cost. |
| 3. | Paid the amountdue on its account payable to Bivins Company within the cashdiscount period. |
| 4. | Sold inventorythat had cost $6,600 for $9,600 on account, under terms 2/10,n/45. |
| 5. | Received merchandise returned from a customer. The merchandiseoriginally cost $560 and was sold to the customer for $860 cash.The customer was paid $860 cash for the returned merchandise. |
| 6. | Delivered goodsFOB destination in Event 4. Freight costs of $660 were paid incash. |
| 7. | Collected theamount due on the account receivable within the discountperiod. |
| 8. | Took a physical count indicating that $2,300 of inventory was onhand at the end of the accounting period. Required: Record each event in a statements model like thefollowing one. In the Cash Flow column, use OA to designateoperating activity, IA for investment activity, FA for financingactivity, NC for net change in cash and NA to indicate the elementis not affected by the event. The first event is recorded as anexample. |
