Principles of Financial Accounting · free preview
Freight Methods, FOB Terms, and Who Owns Goods in Transit
FOB shipping point and FOB destination divide freight cost and transit risk between buyer and seller, and the choice determines whose balance sheet carries the inventory while the carrier is moving.
1. FOB terms allocate cost and risk
FOB terms allocate cost and risk
2. Recording under each term
Recording under each term
3. Why the timing matters
Why the timing matters
4. Common freight arrangements in practice
Common freight arrangements in practice
5. FOB shipping point ownership
Under FOB shipping point, when does ownership of goods transfer to the buyer?
6. FOB destination freight
Under FOB destination, who pays the freight charge, and how does that party record it?
7. Goods in transit at year end
On December 31, goods billed FOB shipping point on December 28 are still on the truck. Whose inventory are they?
8. Choosing destination terms
Why do many online retailers quote prices that include shipping?
9. Freight cost per unit
A buyer pays 300 dollars freight on a shipment of 150 units. Compute the freight cost added to each unit's inventory cost in dollars, number only.
10. Missing freight decision
An invoice states FOB shipping point. Which party records freight-in as part of inventory cost, the buyer or the seller? Give one word.
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