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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

In the income statement, Freight-In is

  1. (a) added to purchases.
  2. (b) subtracted from purchases.
  3. (c) added to sales.
  4. (d) subtracted from cost of goods.

To determine

Find the correct option, the option that indicates the correct action for the Freight-In on the income statement.

Explanation

Purchases: The amount of cost of merchandise bought during a certain period is referred to as cost of purchases.

Justification for correct answer: The shipment charges, handling charges, and freight charges incurred for transportation of merchandise purchased, which is paid by the buyer, is referred to as freight-in. Freight-in is a product cost because it is related to the inventory purchased and hence is added to the Purchases. Hence, option (a) is the correct answer...

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