Question

Jackson Company uses a perpetual inventory system. On November 30, it purchased $10,000 of merchandise and it must pay the $200 shipping charges. The credit terms for the merchandise were 2/10, n/30. The company paid for both the merchandise and the shipping charges nine days after their invoice dates. Which of the following is part of the required journal entry when Jackson pays the shipping charges of $200A) A debit to Inventory for $200
B) A debit to Freight-in for $200
C) A debit to Freight-out for $200
D) A debit to Cash for $200
E) A credit to Accounts Payable for $200

Answer 1

Answer:

Option (A) A debit to inventory for $200

Explanation:

The entire cost of purchasing products (including the cost of having the inventory shipped to the buyer) is reported as part of the cost of the inventory in a perpetual inventory system.

The entry of paying the charges for shipping is included in debit to inventory for $200 and a credit to cash for $200.

Hence,

The answer is option (A) A debit to inventory for $200