Question

On February 12, Clare purchased $400 of merchandise on account from Larsen’s Accessories terms 2/10, n/30. The goods were shipped F.O.B. destination. The freight charges was $40. The amount to be recorded in the Accounts Payable Subsidiary ledger is:

Answer 1

Answer: The amount to be recorded in the subsidiary ledger is $400.

The acronym FOB stands for Free On Board. This means that the seller bears the cost of delivering the goods you’ve purchased to your destination.

Hence Clara will not record the freight expenses in her books of accounts since she did not incur that expense. She will only record $400 in her Accounts Payable Subsidiary Legder.