Question

3. Under the periodic system, which of the following occurs when a company must pay freight...

3. Under the periodic system, which of the following occurs when a company must pay freight charges on merchandise it purchases for resale?

a.

Transportation-in is added to the inventory account.

b.

Transportation-in is subtracted from purchases.

c.

Freight charges are paid by the buyer.

d.

Transportation-in is included in the total cost of purchases used to determine cost of goods sold.
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Homework Answers

Answer #1

Correct answer--------------(D) Transportation-in is included in the total cost of purchases used to determine cost of goods sold.

.Alternate answer could be (C) Freight charges are paid by the buyer.

Use both if first one is incorrect.

.

Freight charges have a specific account in case of Periodic inventory system named as "Freight in account". This account is adjusted at the end of year to get Cost of goods sold .

The Transportation-in is added to the inventory account when perpetual system is used.

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