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ABC Mart received a $20 freight bill for merchandise it purchased with freight terms of FOB shipping point. ABC Mart uses a perpetual inventory system. Assuming it paid the bill immediately, demonstrate the journal entry required to record the freight charges.

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Explanation:

The journal entry is as follows:

Merchandise inventory Dr $20

          To Cash $20

(Being the freight charges is paid)

In the case of the perpetual inventory system, we use the merchandised inventory for freight charges so we debited the merchandise inventory and credited the cash account. Both the accounts are recorded for $20

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