Question

Pierce Company sold merchandise to Stanton Company on account FOB shipping point, 1/10, net 30, for $9,700. Pierce prepaid the $281 shipping charge. Which of the following entries does Pierce make to record this sale? a.Accounts Receivable—Stanton, debit $9,981; Sales, credit $9,981 b.Accounts Receivable—Stanton, debit $9,603; Sales, credit $9,603, and Accounts Receivable—Stanton, debit $281; Cash, credit $281 c.Accounts Receivable—Stanton, debit $9,700; Sales, credit $9,700, and Delivery Expense, debit $281; Cash, credit $281 d.Accounts Receivable—Stanton, debit $9,700; Sales, credit $9,700

Answer 1

Pierce would make the following Journal to record this sale: c.Accounts Receivable—Stanton, debit $9,700; Sales, credit $9,700, and Delivery Expense, debit $281; Cash, credit $281

Step-by-step explanation:

When Goods are sold Free on Board Shipping, the Buyer assumes the risks and rewards associated with the ownership of those goods once they are loaded for shipment to the Buyer`s Premises.Hence the Buyer pays the shipment costs of the goods to their premises.

However the Seller will incurr transportation costs while delivering the goods to the shipping port. These costs are borne by them instead of the Buyer even though Sale is made free on Board.

Thus, Pierce Company should recognise Revenue on the sale up to $ 9,700 and Delivery expenses to the amount of $ 281