Question

Taha Company sold $8,000 of inventory under terms FOB shipping point. Freight out amounted to $200. All transactions were paid with cash. Is Taha responsible for the freight cost?

Answer 1

Under FOB shipping point terms, the buyer is responsible for the freight costs, so Taha Company is not responsible for the $200 freight out cost in the sale of their inventory.

Step-by-step explanation:

When transactions are marked as FOB shipping point, the buyer is responsible for the freight cost from the shipping point to the destination. Since Taha Company sold inventory under these terms, the buyer, not Taha, is responsible for the freight out costs. Taha Company would record the sale of $8,000 and need not include the $200 freight cost in its expenses because that cost is covered by the buyer. The freight out cost is an addition to the invoice total the buyer has to pay and is not an expense for Taha Company.