ACCT 203 Lecture Notes - Lecture 14: European Cooperation In Science And Technology, Income Statement

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27 Jul 2016

School

George Mason University

Department

Accounting

Course

ACCT 203

Professor

Harley

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Document Summary

Inventory formula: begin inventory, plus purchases, equals available for sale, less ending inventory, equals cost of goods sold. Remember you don"t need to have the available for sale subtotal for the formula to be right. Remember that cash discounts, returns and allowances are credited directly to the inventory account when the company is making purchases from a vendor. We use the term 2/10, net 30 for cash discounts in this class. Transportation in is recorded as part of the total cost of inventory because it is simply an additional cost to get the inventory available for sale to customers. There are two scenarios: free on board (fob) destination means the vendor (seller) is paying for the shipping cost and it is passed directly on the company making the purchase. No issues because the cost of shipping is part of the cost of inventory. Free on board (fob) shipping point means the purchaser of the inventory is paying the shipping costs.

Related Questions

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

1. Wild's Flowers sells $400 of flowers for a wedding and thecustomer pays with a bank credit card (e.g., VISA). Wild's Flowersmust pay 3% to the credit card company for credit cardtransactions. Which one of the following statement is correct(true) with respect to the recording of this sale on the books ofWild's Flowers?

a) Sales is debited $400
b) Sales is credited $388.
c) Credit Card Discounts is debited $12.
d) Sales Discounts is debited $12.

2. Which one of the following is correct (true) with respect toinventory?

a) inventory is normally reported on the 3rd line, after A/R, inthe current asset section of a classified balance sheet
b) a manufacturing firm has only one type of inventory, which isfinished goods
c) if a company sells goods and agrees to pay the freight cost,this freight cost would be included in the COGS section of thecompany's income statement
d) goods in-transit at the end of the period, which were sold underterms FOB destination, should be included in the inventory of thebuyer (and not the seller)

coralyak631

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.

pucewildebeest226

ACCT 203 Lecture Notes - Lecture 14: European Cooperation In Science And Technology, Income Statement

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