Final answer:
Sealy retains ownership of the goods until delivery because they were sold FOB destination. Sealy would record a debit to Delivery Expense and a credit to Cash or Accounts Payable for the $320 transportation cost.
Step-by-step explanation:
The term FOB destination means that the responsibility for goods transfers from the seller to the buyer at the destination. This indicates that the seller, Sealy, has ownership of the goods until they are delivered to the buyer's specified location.
The transportation costs are part of the seller's expenses. When Sealy ships goods FOB destination and pays for transportation, the journal entry to recognize this expense would be:
- Debit to Transportation-out or Delivery Expense
- Credit to Cash or Accounts Payable
The exact entry would look something like:
- Debit Delivery Expense $320
- Credit Cash/Accounts Payable $320
This entry ensures that Sealy's financial records reflect the incurred transportation costs.