ADMS 2510 Lecture Notes - Lecture 4: Accounts Payable, Income Statement, Current Asset

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byzantiumswan124

8 Dec 2015

School

York University

Department

Administrative Studies

Course

ADMS 2510

Professor

Donna Zathy

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ADMS 2510 Full Course Notes

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Document Summary

Fob destination seller pays for shipping, and owns in transit, Merchandising businesses and financial statements (cid:1) (cid:1) (cid:1) ownership is passed on to the buyer once its off the transit (cid:1) (cid:1) ownership passes to the buyer as its getting loaded on the transit (cid:1) Fob shipping point buyer pays shipping, and owns in transit, The physical flow of the merchandise will be the balance sheet into the income statement. Merch sold flows onto values in the income statement: sales cost of goods sold = gross profit. Purchase of inventory increases my inventory account and accounts. Sales increases my accounts receivable and revenue. Discount is recorded by the buyer x/# (if x is a number, then this is a percent discounted if the credit is paid in # of days) N/# means net, the whole amount is to be paid on # days.

Related Questions

MATCHING

Inventory system that updates the merchandise inventory account only at the end of the accounting period based on a physical count of merchandise on hand.

Statement where net income is determined by deducting all expenses from all revenues.

Inventory system that updates the merchandise inventory account for every purchase and sale transaction.

Payment arrangements determined by the seller as to when invoices are due and whether early payment discount is offered.

Shipping terms where the ownership of merchandise passes to the buyer when the seller delivers the merchandise to the freight carrier.

Statement that includes subtotals for net sales, gross profit, and net operating income in determining net income.

Losses of inventory due to theft, damage, spoilage, etc. that cause the actual inventory on hand to be less than that on record.

Shipping terms where the ownership of merchandise passes to the buyer when the buyer receives the merchandise.

FOB destination
Periodic inventory system

Credit terms
FOB shipping point

Multiple-step income statement
Inventory shrinkage

Perpetual inventory system

Single-step income statement

1.) X sold Y merchandise on account FOB shipping point, 3/10,net 30, for $10,000. X prepaid the $200 shipping charge. Using theperpetual inventory method, which of the following entries will Ymake if Y pays within the discount period?

	Accounts Payable-X, debit $9,900; Cash, credit $9,900
	Accounts Payable-X, debit $10,000; Transportation In, credit$200; Cash, credit $9,800

	Accounts Payable-X, debit $9,700; Merchandise Inventory, debit$200; Cash, credit $9,900
	Accounts Payable-X, debit $9,700; Transportation In, debit $200;Cash, credit $9,900

2.) Merchandise with an invoice price of $4,000 is purchasedsubject to terms of 2/10, n/30, FOB destination. Transportationcosts paid by the seller totaled $150. What is the cost of themerchandise, assuming the discount is taken?

	$4,070
	$3,920

	$4,067
	$4,150

3.) A sales invoice included the following information:merchandise price, $1,000; transportation, $200; terms 1/10, n/eom,FOB shipping point. Assuming that a credit for merchandise returnedof $300 is granted prior to payment, that the transportation isprepaid by the seller, and that the invoice is paid within thediscount period, what is the amount of cash received by theseller?

	$693
	$893

	$990
	$700

4.) X sold Y merchandise on account FOB shipping point, 2/10,net 30, for $10,000. X prepaid the $200 shipping charge. Which ofthe following entries does X make to record this sale?

	Accounts Receivable debit $9,800; Sales credit $9,800; AccountsReceivable debit $200; Cash credit $200
	Accounts Receivable debit $10,400; Sales credit $10,400

	Accounts Receivable debit $10,000; Sales credit $10,000
	Accounts Receivable debit $10,000; Sales credit $10,000;Transportation Out debit $200; Cash credit $200

amethysthornet919

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.)

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ADMS 2510 Lecture Notes - Lecture 4: Accounts Payable, Income Statement, Current Asset

ADMS 2510 Full Course Notes

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