Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

1. Introduction to Accounting

Types of Accounting

Financial Accounting

1. Introduction to Accounting

Types of Accounting

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Multiple Choice

When goods are shipped FOB destination and the seller pays the freight charges, the buyer:

records the freight cost as part of the inventory

records the freight cost as a selling expense

records the freight cost as a liability

does not record any freight cost as part of the inventory

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Verified step by step guidance

Understand the term 'FOB destination': FOB stands for 'Free on Board,' and 'destination' means the seller retains ownership and responsibility for the goods until they reach the buyer's location. The seller is responsible for freight charges in this case.

Recognize the accounting treatment for freight charges under FOB destination: Since the seller pays the freight charges, these costs are not recorded by the buyer as part of the inventory or any other expense.

Clarify why the buyer does not record the freight cost: The buyer does not incur any freight-related expenses because the seller is responsible for these costs. The buyer only records the inventory at the purchase price agreed upon.

Understand the seller's perspective: The seller records the freight charges as a selling expense because they are responsible for delivering the goods to the buyer's location.

Conclude the buyer's accounting treatment: The buyer does not record any freight cost as part of the inventory, liability, or selling expense since the seller bears the freight charges under FOB destination terms.