Question

Taha Company purchased $8,000 of inventory under terms FOB shipping point. Freight cost amounted to $200. The cost of inventory and freight were paid with cash. Which of the following shows how the recognition of this purchase, including freight costs if applicable, will affect Taha’s financial statements?

Answer 1

Inventory purchased cost = $ 8,000

Add: Freight Cost = $ 200

Total = $ 8,200  

$ 200 will be included in the inventory cost becasue the cost of freight from shipping point to selling point or warehouse is the cost of purhcase. there is cash outlay of $8000 and $ 200 against the inventory and freight

So. in the financial statement - inventory cost will shown for $ 8,200 and there is reduction of $ 8,200 in cash

Presentanation in financial statement of taha's is as below,

Current Assets (Asset Side)

CAsh - $ 8,200

Inventory $ 8,200