ACCTG 1 Lecture Notes - Lecture 23: European Cooperation In Science And Technology, Consignor, Perpetual Inventory

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20 Nov 2020

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Merchandising companies purchase goods for resale they pay gst or hst on the cost of the goods. Companies can get back any gst or hst they pay on purchases. Generally no pst on goods purchased for resale. Freight terms state who pays freight chargers (shipping costs) and who is responsible for the risk of loss or damage to the merchandise during transit. Means seller is responsible for delivering goods to the destination. Seller pays freight costs for transporting the goods to the buyer"s destination and is responsible for any loss or damage that occurs along the way. Means buyer is responsible for freight costs from the shipping point to the buyers destination. Buyer responsible for any loss or damage that occurs along the way. Credit is given if the purchase was made on account. The buyer may choose to keep the merchandise if the seller is willing to give an allowance (deduction) from the purchase price.

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Nov.	3	Instructions: Journalize the transactions below (credit and debit) Purchased merchandise on account from Moonlight Co., list price $90,000, trade discount Discounts from the list prices in published catalogs or special discounts offered to certain classes of buyers. 25%, terms FOB destination Freight terms in which the seller pays the transportation costs from the shipping point to the final destination. , 2/10, n/30.
	4	Sold merchandise for cash, $36,900. The cost of the goods sold The cost that is reported as an expense when merchandise is sold. was $20,480.
	5	Purchased merchandise on account from Papoose Creek Co., $50,700, terms FOB shipping point Freight terms in which the buyer pays the transportation costs from the shipping point to the final destination. , 2/10, n/30, with prepaid freight of $750 added to the invoice The bill that the seller sends to the buyer. .
	6	Returned $12,750 ($17,000 list price less trade discount of 25%) of merchandise purchased on November 3 from Moonlight Co.
	8	Sold merchandise on account to Quinn Co., $14,550 with terms n/15. The cost of the goods sold was $9,510.
	13	Paid Moonlight Co. on account for purchase of November 3, less return of November 6.
	14	Sold merchandise on VISA, $239,110. The cost of the goods sold was $137,270.
	15	Paid Papoose Creek Co. on account for purchase of November 5.
	23	Received cash on account from sale of November 8 to Quinn Co.
	24	Sold merchandise on account to Rabel Co., $57,100, terms 1/10, n/30. The cost of the goods sold was $32,270.
	28	Paid VISA service fee of $3,700.
	30	Paid Quinn Co. a cash refund of $5,960 for returned merchandise from sale of November 8. The cost of the returned merchandise was $3,290.

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Travis Company has just completed a physical inventory count at year-end, December 31 of the current year. Only the items on the shelves, in storage, and in the receiving area were counted and costed on a FIFO basis. The inventory amounted to $66,500. During the audit, the independent CPA developed the following additional information: Goods costing $910 were being used by a customer on a trial basis and were excluded from the inventory count at December 31 of the current year. Goods in transit on December 31 of the current year, from a supplier, with terms FOB destination (explained in the âRequiredâ section), cost $1,400. Because these goods had not yet arrived, they were excluded from the physical inventory count. On December 31 of the current year, goods in transit to customers, with terms FOB shipping point, amounted to $1,800 (expected delivery date January 10 of next year). Because the goods had been shipped, they were excluded from the physical inventory count. On December 28 of the current year, a customer purchased goods for cash amounting to $3,050 and left them âfor pickup on January 3 of next year.â Travis Company had paid $1,720 for the goods and, because they were on hand, included the latter amount in the physical inventory count. On the date of the inventory count, the company received notice from a supplier that goods ordered earlier at a cost of $4,000 had been delivered to the transportation company on December 27 of the current year; the terms were FOB shipping point. Because the shipment had not arrived by December 31 of the current year, it was excluded from the physical inventory count. On December 31 current year, the company shipped $1,700 worth of goods to a customer, FOB destination. The goods are expected to arrive at their destination no earlier than January 8 of next year. Because the goods were not on hand, they were not included in the physical inventory count. One of the items sold by the company has such a low volume that management planned to drop it last year. To induce Travis Company to continue carrying the item, the manufacturer-supplier provided the item on a âconsignment basis.â This means that the manufacturer-supplier retains ownership of the item, and Travis Company (the consignee) has no responsibility to pay for the items until they are sold to a customer. Each month, Travis Company sends a report to the manufacturer on the number sold and remits cash for the cost. At the end of December of the current year, Travis Company had seven of these items on hand; therefore, they were included in the physical inventory count at $780 each. Required: Assume that Travisâs accounting policy requires including in inventory all goods for which it has title. Note that the point where title (ownership) changes hands is determined by the shipping terms in the sales contract. When goods are shipped âFOB shipping point,â title changes hands at shipment and the buyer normally pays for shipping. When they are shipped âFOB destination,â title changes hands on delivery, and the seller normally pays for shipping. Begin with the $66,500 inventory amount and compute the correct amount for the ending inventory. (Deductible amounts should be entered with a minus sign. If no adjustment is necessary, enter a 0 in the cell.)

blushwater-buffalo929

Unearned income is a liability.

A) True
B) False

Prepaid expenses are assets.

A) True
B) False

A business with no cash is insolvent.

A) True
B) False

Assets must always equal liabilities plus capital.

A) True
B) False

Assets normally have credit balances.

A) True
B) False

Balance sheets report profitability.

A) True
B) False

All payables are liabilites.

A) True
B) False

FOB destination means buyer pays freight.

A) True
B) False

Accrued revenue, by defintion, is unearned.

A) True
B) False

10.

Inventory is a current asset.

A) True
B) False

11.

Debits reduce liabilites.

A) True
B) False

12.

Sales returns are debited to inventory at cost.

A) True
B) False

13.

Sales minus sales returns, allowances, and discounts equals costof sales.

A) True
B) False

14.

Withdrawals reduce net income.

A) True
B) False

15.

A business with more debt than equity is insolvent.

A) True
B) False

16.

A business with more equity than debt is profitable.

A) True
B) False

17.

Net losses reduce capital.

A) True
B) False

18.

FIFO leaves the most recent costs in inventory.

A) True
B) False

19.

When creditors are paid, cash is always credited.

A) True
B) False

20.

There are two types of journal entires, simple and complex.

A) True
B) False

21.

Trade discounts reduce transportation costs.

A) True
B) False

22.

Cash discounts taken are credited to inventory.

A) True
B) False

23.

Cash discounts given are subtracted from sales.

A) True
B) False

24.

Recording unearned income requires a credit to cash.

A) True
B) False

25.

Journal entries must always contain both debits and credits.

A) True
B) False

26.

All adjusting entries always contain both income statement andbalance sheet accounts.

A) True
B) False

27.

Equity and capital are the same.

A) True
B) False

28.

Balance sheet accounts are either assets or liabilites.

A) True
B) False

29.

Debits reduce assets.

A) True
B) False

30.

when recording income, a revenue account must always becredited.

A) True
B) False

31.

All expense accounts, even prepaid expenses, normally have debitbalances.

A) True
B) False

32.

Accounts payable would be debited to record an expense owed.

A) True
B) False

33.

A seller would record freight costs paid FOB shipping as acredit.

A) True
B) False

34.

When receivables are collected, cash is always debited.

A) True
B) False

35.

When buyers return inventory, sellers credit cost of sales.

A) True
B) False

36.

Copyrights are amortized.

A) True
B) False

37.

Inventory is depleted.

A) True
B) False

38.

Land depreciates.

A) True
B) False

39.

A petty cash shortage would be recorded as a debit to cash shortand over.

A) True
B) False

40.

When notes are collected, cash is debited for their maturityvalue.

A) True
B) False

41.

When reconciling cash, deposits in transit are added to thedepositor's book balance.

A) True
B) False

42.

Trade discounts are recorded on worksheets.

A) True
B) False

43.

Accuumlated depreciation is a contra-asset.

A) True
B) False

44.

Depreciation is an expense that reflects the cost ofuncollectible receivables.

A) True
B) False

45.

Revenue would appear on a post closing trial balance as acredit.

A) True
B) False

46.

Income summary is closed to capital.

A) True
B) False

47.

Adjustments are recorded on worksheets.

A) True
B) False

48.

Journalizing follows posting.

A) True
B) False

49.

All general ledger accounts are adjusted and closed at the endof the accounting cycle.

A) True
B) False

50.

Supplies are assets.

A) True
B) False

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ACCTG 1 Lecture Notes - Lecture 23: European Cooperation In Science And Technology, Consignor, Perpetual Inventory

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