33:010:272 Midterm: Exam 2 Study Guide

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Chapter 5 accounting for merchandising operations: merchandising operations, operating cycles, flow of costs perpetual and periodic inventory systems. Beginning inventory + cogp = cost of goods available for sale. Perpetual inventory system shows the inventory that should be on hand for every item; cogs is determined each time a sale occurs. Periodic inventory system cogs is determined at the end of the accounting period: advantages of the perpetual system. Provides better control over inventories: recording purchases of merchandise. Companies record purchases of asset acquired for use to supplies or. To record goods purchased on account: freight costs. Fob shipping point buyer pays freight cost. To record payment of freight on goods purchased. To record payment of freight on goods sold. 2/10, n/30 = two-ten, net thirty buyer may take a 2% cash discount on the invoice price if payment is made within 10 days of the invoice date.

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