Question

Freight cost paid by a seller on merchandise sold to customers will cause an increase?

A. in the selling expense of the buyer
B. in the operating expense for the seller
C. to the cost of goods sold of the seller
D. Toa contra-revenue account of the seller

Answer 1

Freight costs incurred by the seller when delivering goods to customers increase the seller's operating expenses, classified as a selling expense on their income statement.

Step-by-step explanation:

Freight cost paid by a seller on merchandise sold to customers will normally result in an increase in the operating expenses for the seller. These costs are associated with delivering the goods to the customer and therefore are classified as a selling expense on the seller's income statement. It does not directly affect the cost of goods sold, as this pertains to the direct costs of producing the products, nor does it create a contra-revenue account, which is typically used for sales returns and allowances.