Financial Accounting-w/cd-package
Financial Accounting-w/cd-package
3rd Edition
ISBN: 9780131060876
Author: REIMERS
Publisher: PEARSON
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Concept explainers

The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can resu…
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
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Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately…
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial repor…
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Textbook Question
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Chapter 5, Problem 1YT

In each separate situation, identify which company must pay the freight.

  1. 1. Company A purchased merchandise from Company X, FOB destination, for $10,000.
  2. 2. Company B purchased merchandise from Company Y, FOB shipping point, for $10,000.
Expert Solution & Answer
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To determine

Identify the company that must pay the freight.

Explanation of Solution

FOB Shipping point means that the buyer pays all costs incurred for the delivery of goods once the goods is left from the supplier’s warehouse.

FOB Destination means that the buyer pays all costs incurred for the delivery of goods once the goods is delivered at buyer receiving point.

Identify the company that must pay the freight:

  1. 1. Under FOB destination, the buyer does not pay shipment charges whereas the vendor pays the shipping cost. In this case, Company X is the vendor hence Company X needs to pay the freight charges.
  2. 2. Under FOB shipping point, the buyer pays the shipment charges whereas the vendor does not pays the shipping cost. In this case, Company B is the buyer hence Company B needs to pay the freight charges.

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Chapter 5 Solutions

Financial Accounting-w/cd-package

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