Wright Company recently made a $10,000 purchase from a major supplier. Shipping costs were $200, terms FOB shipping point. To record this purchase, Wright Company will need to debit the
A) Merchandise Inventory account for $10,000.
B) Cost of Goods Sold account for $200.
C) Merchandise Inventory account for $10,200.
D) Cost of Goods Sold account for $10,200.

Question

Quizplus · Accepted Answer

The correct answer is C) Merchandise Inventory account for $10,200 because the terms FOB shipping point mean that the buyer (Wright Company) takes ownership of the goods as soon as they are shipped, and therefore, the shipping costs are part of the cost of the inventory. Thus, the total cost debited to Merchandise Inventory includes both the purchase price of $10,000 and the shipping costs of $200, totaling $10,200.

Wright Company Recently Made a $10,000 Purchase from a Major