Question

In this inventory system, where are freight-in costs debited to?

1) Inventory
2) Accounts Payable
3) Cost of Goods Sold
4) Freight-In Expense

Answer 1

In an inventory system, freight-in costs are debited to the Inventory account because they are part of the cost of acquiring the inventory.

Step-by-step explanation:

In an inventory system, freight-in costs are typically debited to the Inventory account. This is because freight-in costs are considered to be a necessary expense to bring the inventory to a saleable condition and location. By capitalizing these costs into the Inventory account, they are not recognized as an expense until the associated inventory is sold, at which point these costs are then expensed as part of the Cost of Goods Sold (COGS).

Therefore, the correct answer to where freight-in costs are debited to in an inventory system is: 1) Inventory.