Inventory cost consists of purchase price:
A)plus freight-in.
B)plus freight-out.
C)less freight-in.
D)less freight-out.

Question

Quizplus · Accepted Answer

If the terms of sale are FOB shipping point,ownership of the goods transfers to the purchaser at the shipping point,so the purchaser would pay the transportation cost.This transportation cost (also called freight-in)is recorded as an addition to the purchaser's Inventory account because it is a cost the purchaser incurs to obtain the inventory.In general,a purchaser should include in the Inventory account any costs needed to get the inventory into a condition and location ready for sale.Costs that are incurred after the inventory has been made ready for sale,such as freight-out to deliver goods to customers,should be treated as selling expenses.

Inventory Cost Consists of Purchase Price