@ 2012, cengage learning accounting for merchandising businesses lo 3c – recording freight and...
TRANSCRIPT
@ 2012, Cengage Learning
Accounting for Merchandising Businesses
LO 3c – Recording Freight and Sales Tax Transactions
Chart of AccountsLO 3LO 3
Freight & Sales TaxLO 3LO 3
Purchases and sales of merchandise often involve transactions to record freight and sales taxes.
Freight
If ownership of the merchandise passes to the buyer when the seller delivers the merchandise to the freight carrier, the terms are said to be FOB (free on board) shipping point.
LO 3LO 3
On June 10, NetSolutions buys merchandise from Magna Data on account, $900, terms FOB shipping point and pays the shipping cost of $50.
LO 3LO 3
Freight
LO 3LO 3
Freight
If ownership of the merchandise passes to the buyer when the buyer receives the merchandise, the terms are said to be FOB (free on board) destination.
On June 15, NetSolutions sells merchandise to Kranz Company on account, $700, terms FOB destination. The cost of the merchandise sold is $480.
Sale Plus Freight CostLO 3LO 3
On June 15, NetSolutions pays freight of $40 on the sale of June 15.
Sale Plus Freight CostLO 3LO 3
On June 20, NetSolutions sells merchandise to Planter Company on account, $800, terms FOB shipping point. NetSolutions paid freight of $45, which was added to the invoice. The cost of the merchandise sold is $360.
LO 3LO 3
Seller Prepays Freight
LO 3LO 3
Seller Prepays Freight
Freight TermsLO 3LO 3
Freight TermsLO 3LO 3
Sales Taxes
Sellers collect sales tax at the time of a sale on behalf of the state or local taxing authority.
LO 3LO 3
On August 12, merchandise is sold on account to Lemon Company, $100. The state has a 6% sales tax.
Sales TaxesLO 3LO 3
On a regular basis, the seller pays to the taxing authority (state) the amount of the sales taxes collected.
Sales TaxesLO 3LO 3