Question

1.     Bread Co. commenced operations during the year as a large importer and exporter of baked goods. The

imports were all from one company in France. The export sales were conducted as drop shipments. Bread never took possession of the goods and they were merely transshipped at San Francisco. Bread Co. reported the following data:

Purchases during the year

$15 million

Shipping costs from overseas

 $3 million

Shipping costs to export customers

 $2 million

Inventory at year end, before including any shipping costs

 $5 million

What amount of shipping costs should Bread Co. record as selling costs and NOT include in ending inventory or cost of sales?

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