Question

Freight-in is added to net purchases to arrive at the cost of goods purchased.

Select one:
A. True
B. False

Answer 1

Freight-in costs are factored into the calculation of the cost of goods purchased by adding them to net purchases, reflecting the true total cost of inventory.

Step-by-step explanation:

Freight-in is indeed added to net purchases when calculating the cost of goods purchased. The equation is true: Net Purchases + Freight-in = Cost of Goods Purchased. Freight-in includes all the shipping and handling costs associated with the transportation of goods from the vendor to the buyer's location. These costs are considered a part of the cost of purchasing inventory, and therefore, they are included in the inventory account on the balance sheet until the inventory is sold, at which point they are expensed as part of cost of goods sold.