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Financial Accounting

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Shipping under Perpetual Inventory System

FINACT-GLYVLT

CoffeeBeans Co. used the perpetual inventory system. The company purchased \$10,000 of coffee beans (i.e., inventory) on account and paid \$350 shipping charges for the delivery of the product. Which of the following statement is correct?

A

The shipping cost is part of the product cost and is debited to the Inventory account.

B

The shipping cost is called "freight out".

C

The shipping cost is an operating expense.

D

The shipping cost reduces cost of goods sold.