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Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition by Donald E. Kieso, Paul D. Kimmel, Jerry J. Weygandt

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SOLUTION TO EXERCISE 5-2

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TIP: Freight terms are expressed as either FOB shipping point or FOB destination. The letters FOB mean free on board. Thus, FOB shipping point means that goods are placed free on board the carrier by the seller, and the buyer pays the freight. Conversely, FOB destination means that the goods are placed free on board for the buyer's place of business, and the seller pays the freight.

TIP: A purchase discount is computed on the amount purchased less any purchase returns or purchase allowances.

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