Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 21

For the following questions, circle the best respones.

Michael sells Melissa his grand piano and wishes to avoid both the cost of shipping it and the risk of loss while the piano is in transit. He should send the piano

a. FOB shipping point, freight collect.

b. FOB shipping point, freight prepaid.

c. FOB destination, freight collect.

d. FOB destination, freight prepaid.

Step 1 of 4

(a)

Because Person M wishes to avoid both the cost of shipping and the risk of loss while it is in transit, he should send the product FOB shipping point, freight collect. FOB shipping point means that the buyer accepts ownership of the purchased goods at the time of shipment. Freight collect means that the buyer is responsible for any freight costs.