A company using the perpetual inventory system paid cash for a transportation-in cost.Which of the following choices reflects the effects of this event on the financial statements?

Question

Quizplus · Accepted Answer

Transportation-in is a product cost that increases one asset (merchandise inventory) and decreases another asset (cash). Because product costs are expensed when inventory is sold, not when the goods are purchased, the event does not affect net income. It is reported as a cash outflow for operating activities.

A Company Using the Perpetual Inventory System Paid Cash for a Transportation-In