On October 31, Janoch's Dog Kennel purchased $900 of merchandise on account from the Ganster Company. The goods were shipped F.O.B. shipping point. The freight charge of $110 was paid by Ganster Company and added to the invoice. The amount to record in the Merchandise Inventory account is:

Question

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The amount to record in the Merchandise Inventory account is $1,010 because it includes the cost of the merchandise ($900) plus the freight charges ($110) paid by the Ganster Company, which were added to the invoice. Since the goods were shipped F.O.B. shipping point, the buyer (Janoch's Dog Kennel) takes ownership at the shipping point, and thus, the shipping cost is part of the inventory cost.

On October 31, Janoch's Dog Kennel Purchased $900 of Merchandise