Questions: Paid 270 cash for freight charge on a recent purchase of inventory, terms FOB Shipping Point.

Transcript text: TB Journal Entry 4-264 (Static) Recording buyer's shipping costs a. Paid $\$ 270$ cash for freight charge on a recent purchase of inventory, terms FOB Shipping Point. View transaction list Journal entry worksheet 1 Paid $\$ 270$ cash for freight charge on a recent purchase of inventory, terms FOB Shipping Point. Note: Enter debits before credits.

Solution

To record the transaction of paying $270 cash for the freight charge on a recent purchase of inventory with terms FOB Shipping Point, we need to make a journal entry.

In accounting, FOB Shipping Point means that the buyer is responsible for the shipping costs. Therefore, the freight charge should be added to the cost of the inventory.

Here is the journal entry:

Debit Inventory: This increases the inventory account because the freight cost is part of the cost of acquiring the inventory.
Credit Cash: This decreases the cash account because cash was paid for the freight charge.

The journal entry would be:

Journal Entry:

| Account | Debit | Credit | |---------------|-------|--------| | Inventory | $270 | | | Cash | | $270 |

Explanation:

Inventory (Debit $270): The cost of the inventory is increased by the freight charge, as it is part of the cost of bringing the inventory to its intended location.
Cash (Credit $270): Cash is decreased because the company paid $270 for the freight charge.

This entry ensures that the cost of the inventory reflects all costs incurred to bring it to its current location and condition.

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