It was determined that a shipment on Dec 29 from BGA to Hubba Bubba Corp. arrived...

It was determined that a shipment on Dec 29 from BGA to Hubba Bubba Corp. arrived at Hubba Bubba on Jan 2. Hubba Bubba purchased from BGA 100,000 lbs of bubble gum for a sales price of $4.00 per lb. Cost of the product was $2.00 per lb. Terms were FOB Shipping Point. Payment terms Net 30. BGA billed the company on account, including the required 5% sales tax which was added to the invoice to Hubba Bubba. Record this transaction on the journal.

Expert Solution

1.FOB shipping point or FOB origin, is used to mean the seller has to get the goods to the shipping point, but the buyer is responsible for the expense of transporting the goods from the shipping point to their destination.

2.Once the goods are at the shipping point, the ownership of the goods and the risk passes to the buyer and should be included in the inventory of the buyer as goods in transit. The buyer now has an obligation to pay for the goods and is responsible for all future expenses.

So Under this Situation, Purchase entry should be passed in books of Hubba Bubba on Dec.29 when goods are shipped .

Journal entry will be as follows

1. In Books of BGA:

2. In Books of Hubba Bubba Corp.

ekkarill92 answered 3 months ago

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