[Anonymous]

The following information pertained to Azur Co. for the year:

Purchases

$102,800

Purchase discounts

$10,280

Freight-in

$15,420

Freight-out

$5,140

Beginning inventory

$30,840

Ending inventory

$20,560

What amount should Azur report as cost of goods sold for the year?

a. $118,220

b. $123,360

c. $128,500

d. $102,800

According to Becker, the COGS for the year would be

Beginning Inventory + Purchases- Purchase Discount + Freight Ins -Ending Inventory = COGS. So, the correct answer would be “a.” However, I am not sure why we do not include Freight-out, which is a selling expense, in the COGS. (Why isn’t it $118,220 + $5,140?). I mean, shouldn’t we consider selling expense as an auxiliary of COGS, hence its inclusion to COGS?

Thank you! 🙂

[nbad311]

Selling expense = operating expense, so try think of it more as an operating expense instead of being related to inventory (COGS/freight-in). That's how I remember it anyway!

REG - 65, 70, 80!
BEC - 35, 62, 79!
AUD - 73, 75!
FAR - 65, 73, 70, 75! DONE.

[peetree]

Cost of selling vs. Cost of producing the good sold.

FAR 02/21/13 - 95
REG 07/02/13 - 87
AUD 08/02/13 - 94
BEC 08/30/13 - 85
Ethics Exam - 90

Illinois candidate awaiting his license

Used Becker Self Study | Ninja Audio | Becker Flash Cards | Ninja Notes | Wiley Test Bank

[thehip41]

Freight In, this is charged when you buy the inventory, so when you sell the inventory, it goes into Cost of Goods sold.

Freight Out, you are paying this when you SELL your stuff. It's a period cost of doing business, much like fuel costs and electricity.

When you sell 1 specific piece of inventory, the COGS increases because the Freight In increased the overall value of the inventory asset.

“Because of the cost principle, inventory is reported on the balance sheet at the amount paid to obtain (purchase) the merchandise, not at its selling price.”

This includes Freight In.

Because Freight In is included in the Inventory Asset, when Inventory is sold, the freight in hits COGS.

Freight out doesn't, its just a cost of doing business

FAR - 83
AUD - 73 92
BEC - 83
REG - 88

Licensed CPA in the state of Michigan

[Zaq]

In FAR, freight-out is a Selling & General Administrative expense while freight-in is added to the product cost to get your COGS.

Try not to overthink it too much. Just know that freight-in is included in the product cost, and freight-out is a period expense thus not included in the computation to reach COGS.

Edit: LOL. I thought this was a BEC question.

FAR: 50, 76!
REG: 74... (ouch baby, very ouch), 76!
AUD: 65, 91!?
BEC: 80! Aaaand doneskies!

May 2012 to August 2013. Can't believe it's over.

[Anonymous]

Thank you so much for the help everyone! 🙂 Sometimes I wish that I could just stick a computer chip in my head with everything that I need to know for the CPA. I really should be living in 2113, not 2013.

[JustCpa]

Lets say

Amazon buy 1 LED TV from from Panasonic for 1000

Panasonic charge amazon 50 to ship to Amazon WH.

So for Amazon 50 is cost of acquiring TV thats freight In (coming in WH) and it will go under COGS in BS

Now same TV one customer bought and he wanted to ship to his home in say NYC.

Amazon have to pay UPS to ship this TV to customer. – Thats freight out (going out of WH) and it will go under shipping exp, generally it will go under Sales section (reduction of sales) in P&L.

Lets see What I can do...

FAR- Who Knows when?
BEC- I don't know..
REG- Give me a break..
AUD- Getta out of here...

[Author]

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