55.If the buyer bears the freight costs related to a purchase, the terms are said to be FOB destination.A.True.B.False. Show
56.When the terms of sale are FOB shipping point, the buyer should pay the freight charges. Get answer to your question and much more 57.If merchandise costing $3,500, terms FOB destination, 2/10, n/30, with prepaid freight costs of $125, is paid within10 days, the amount of the purchases discount is $70. Get answer to your question and much more 58.The chart of accounts for a merchandise business would include an account called Delivery Expense. Get answer to your question and much more 59.There is no difference between the recording of cash sales and the recording of MasterCard or VISA sales.A.True.B.False. 60.When companies use a perpetual inventory system, the recording of the purchase of inventory will include a debit topurchases. Get answer to your question and much more 61.Most companies willnottake a purchases discount, because 1% or 2% discounts are insignificant. Get answer to your question and much more 62.The seller may prepay the freight costs even though the terms are FOB shipping point. Get answer to your question and much more What is FOB Destination?FOB destination is a contraction of the term "Free on Board Destination." The term means that the buyer takes delivery of goods being shipped to it by a supplier once the goods arrive at the buyer's receiving dock. There are four variations on FOB destination terms, which are noted below. FOB Destination, Freight Prepaid and AllowedThe seller pays and bears the freight charges and owns the goods while they are in transit. Title passes at the buyer's location. FOB Destination, Freight Prepaid and AddedThe seller pays the freight charges but bills them to the customer. The seller owns the goods while they are in transit. Title passes at the buyer's location. FOB Destination, Freight CollectThe buyer pays the freight charges at time of receipt, though the supplier still owns the goods while they are in transit. FOB Destination, Freight Collect and AllowedThe buyer pays for the freight costs, but deducts the cost from the supplier's invoice. The seller still owns the goods while they are in transit. Thus, the key elements of all the variations on FOB destination are the physical location during transit at which title changes and who pays for the freight. If a buyer's transportation department is proactive, it may avoid FOB destination terms, instead favoring FOB shipping point terms so that it can better control the logistics process. Any type of FOB terms may be superseded if a customer elects to override those terms with customer-arranged pickup, where a customer arranges to have goods picked up at the seller's location, and takes responsibility for the goods at that point. In this situation, the billing staff must be aware of the new delivery terms, so that it does not bill freight to the customer. Since the buyer takes ownership of the goods at its own receiving dock, that is also where the seller should record a sale. The buyer should record an increase in its inventory at the same point (since the buyer is undertaking the risks and rewards of ownership, which occurs at the point of arrival at its shipping dock). Also, under FOB destination terms, the seller is responsible for the cost of shipping the product. If the goods are damaged in transit, the seller should file a claim with the insurance carrier, since the seller has title to the goods during the period when the goods were damaged. In reality, the shipper will probably record a sale as soon as merchandise leaves its shipping dock, irrespective of the terms of delivery. Thus, the real impact of FOB destination terms is the determination of who pays for the freight expense. FOB stands for "freight on board." The term is used to describe the point in a transaction where a product being shipped becomes the property of the buyer. In an FOB Origin shipping arrangement, the buyer is the owner of the product as soon as it leaves the point of origin. In an FOB Destination shipping arrangement, the shipment becomes the property of the buyer when it reaches a specified destination in the shipping process. Unless specified otherwise, the seller pays shipping costs in an FOB Destination arrangement. FOB Costs and PaymentsWhether the buyer or seller is responsible for shipping charges depends on the specific FOB Destination arrangement. In shipping arrangements classified as FOB Destination, Freight Collect, the buyer is responsible for shipping costs. In FOB Destination, Freight Prepaid & Add arrangements, the seller pays for the shipping costs but then passes on the cost to the buyer. FOB DestinationThe destination term makes the arrangement specific to the ownership of the property in transit. The distinction is important because the selling party retains ownership throughout the shipping process. On arrival at the destination, the buyer assumes control of the property. An FOB Destination designation is common on high-value goods where the seller maintains liability for the goods until they are safely received and inspected. So who is paying for the shipping in this whole process? The seller typically covers the shipping arrangements and costs in FOB Destination arrangements. If other terms are negotiated, however, the buyer may be liable for the expenses. The shipping company requires payment before shipping the goods, so the process of arranging and paying for shipping is all done in advance. Shipping is often factored into the cost by the seller, making the process of paying and booking freight simple for everyone. The seller can factor that cost into its product, so the buyer is paying the shipping without a specific line item for the price. If the seller does not factor shipping into the overall costs, it bills shipping as a line item on the total bill for the goods, which makes it clear that shipping is charged separately from the price of goods. Some sellers position shipping this way so that the cost of goods appears lower than the competitions' prices. After you make a purchase, however, the shipping cost brings the total back in line with other quotes where the shipping is built into the price. Record KeepingA major reason for shipping FOB Destination is to simplify record keeping. When goods are in transit, who has ownership? In the case of FOB Destination shipments, the goods remain in the seller's inventory while in transit. After reaching the destination, the buyer assumes ownership and adds the goods to its inventory. The process ensures the goods are accounted for while in transit; otherwise, they enter a gray area of ownership. It also serves the accounting department, which must record the sale and transfer of inventory. When the inventory is received and accepted at the destination, the delivery confirmation serves as proof of the goods leaving the seller inventory. The delivery confirmation serves a similar purpose for the buyer's accounting department. After the goods are accepted, they are logged in to inventory and accounted for as assets in the business. Every FOB Destination received delivery confirmation should immediately go to accounting to keep track all inventory and financials relative to physical goods. While this is a common practice in business, private transactions can also use FOB Destination terms. In a private scenario, the new owner simply assumes title to the goods. Who pays freight cost when the terms are FOB destination?When it comes to the FOB shipping point option, the seller assumes the transport costs and fees until the goods reach the port of origin. Once the goods are on the ship, the buyer is financially responsible for all costs associated with transport as well as customs, taxes, and other fees.
What does FOB destination mean?Free on Board: Destination
In a FOB destination agreement, the seller retains ownership of the goods (and is therefore responsible for replacing damaged or lost goods) up until the point where the goods have reached their final destination.
When the terms of sale are FOB shipping point the buyer should pay the transportation charges?06 Who Assumes the Cost of FOB Shipping Point vs Destination? Traditionally with FOB shipping point, the seller pays the transportation cost and fees until the cargo is delivered to the port of origin. Once on the ship, the buyer is responsible financially for transportation costs, customs clearance, fees, and taxes.
What is FOB shipping point and FOB destination?In a FOB shipping point contract, the seller transfers any title of ownership to the buyer upon the product leaving the seller's location. The buyer then has full ownership. In a FOB destination sale contract, the buyer may not receive the title of ownership until the product reaches the buyer's location.
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