Becker's Bookstore shipped merchandise FOB destination to a customer. If the transportation costs are paid in cash, which of the following choices reflects how this transaction will affect the company's financial statements? Assets = Liab. + Equity Rev. − Exp. = Net Inc. Cash Flow
A. − = NA + − NA − + = − − OA
B. − = NA + − NA − + = − NA
C. +/− = NA + NA + − NA = + − OA
D. − = NA + − − − NA = − − OA

a. Option A
b. Option B
c. Option C
d. Option D

a. Option A

Explanation:

FOB destination means the transportation charges are paid by the seller and it is the responsibility of the seller unless the sale product reaches its destination.

In paying transportation charges cash is credited and expense is debited.

Assets = Liab. + Equity Rev. − Exp. = Net Inc. Cash Flow

Assets will decrease as cash is paid.

Liab. No effect will be on liabilities

Revenue will be decreased.

Expenses will increase .

Hence option A is the answer.

    Assets = Liab. + Equity Rev. − Exp. = Net Inc. Cash Flow

A.      ( −) =     NA +( − NA) ( −)  (+) = − (− OA)

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