Question

For each transaction of Sealy Co., (a) determine whether or not Sealy owns the goods during transit. (b) If Sealy is responsible for transportation costs, record the entry for shipping costs assuming they are paid in cash. Assume Sealy uses the perpetual inventory system.

Answer 1

The indication of whether or not Sealy Co. owns the goods during transit is as follows:

1. Yes. Sealy Co. owns the goods.

2. Yes. Sealy Co. owns the goods.

3. No. Sealy Co. does not own the goods.

4. No. Sealy Co. does not own the goods.

Journal Entries:

1. Debit Freight-in $600

Credit Cash $600

• To record transportation costs for the purchase of goods on FOB shipping point.

2. Debit Freight-Out $200

Credit Cash $200

• To record thetransportation costs for the sale of goods on FOB destination point.

Data Analysis:

1. Yes. Freight-in $600 Cash $600

2. Yes. Freight-0ut $200 Cash $200

3. No. No Journal Entry Required $350

4. No. No Journal Entry Required $125.

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