MANAGEMENT

Detailed explanation-1: -If merchandise is sold on account to a customer for $1, 000, terms FOB shipping point, 1/10, n/30, and the seller prepays $50 in freight, the amount of the discount for early payment would be: $10.00.

Detailed explanation-2: -FOB is a shipping term that stands for “free on board.” If a shipment is designated FOB (the seller’s location), then as soon as the shipment of goods leaves the seller’s warehouse, the seller records the sale as complete. The buyer owns the product en route to its warehouse and must pay any delivery charges.

Detailed explanation-3: -For the buyer, the journal entry will be purchase debit, freight debit and accounts payable, and cash credit.

Detailed explanation-4: -In Accounting The point of FOB shipping point terms is to transfer the title to the goods to the buyer at the shipping point. Goods in transit should therefore be reported as a purchase and as inventory by the buyer, and as a sale and an increase in accounts receivable by the seller.

Detailed explanation-5: -When a company sells merchandise and the terms are FOB shipping point and pays the shipping costs, the seller would record the transportation costs with the following entry: debit accounts receivable, credit cash.