Question

In a periodic inventory system, what are freight-in costs?

1) Included in the cost of goods sold
2) Recorded as an expense
3) Not considered in the inventory valuation
4) Cannot be determined

Answer 1

Freight-in costs in a periodic inventory system are included in the inventory's cost and are recognized as part of the cost of goods sold when inventory is eventually sold.

Step-by-step explanation:

In a periodic inventory system, freight-in costs are the shipping charges associated with the delivery of goods from suppliers to the place of business. These costs are considered part of the cost of purchasing inventory and are included in the inventory's cost, making it part of the cost of goods when the inventory is eventually sold.

Therefore, when addressing the given options, freight-in costs are included in the cost of goods sold (COGS) and not recorded as an expense in the period they are incurred; instead, they are capitalized as part of inventory costs and expensed when the inventory is sold.