A company using the perpetual inventory method paid cash for freight costs to purchase merchandise. Which of the following answers reflects the effects of this event on the financial statements?

Question

Quizplus · Accepted Answer

The payment for transportation-in will decrease one asset (cash) and increase another asset (merchandise inventory). It will not affect the income statement, but will be reported as a cash outflow for operating activities on the statement of cash flows.

A Company Using the Perpetual Inventory Method Paid Cash for Freight