Becker's Bookstore shipped merchandise FOB destination to a customer. If the transportation costs are paid in cash, which of the following choices reflects how this transaction will affect the company's financial statements?

Question

Quizplus · Accepted Answer

FOB destination means the seller is responsible for the freight cost, which is called transportation-out. Transportation-out is a period cost that decreases assets (cash) and increases expenses (transportation-out), which decreases net income and equity. It is reported as a cash outflow for operating activities.

Becker's Bookstore Shipped Merchandise FOB Destination to a Customer