Acct 221 1st Edition Lecture 9Outline of Last Lecture II. Merchandising Businessesa. Inventoryb. Gross Marginc. Multi-Step Income Statement d. Cost of Goods Sold Outline of Current LectureI. Transportation CostsII. DiscountsIII. Sales Returns and AllowancesCurrent Lecture Chapter 4 Transportation Costs FOB= Free on Board FOB shipping point = BUYER pays- Account title = Transportation-in Goes into inventory as the buyer FOB destination = SELLER pays- Account title = Transportation- out Goes into expense on buyers part DiscountsThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute. Cash discount = deduction from the invoice price granted to induce early payment ofthe amount due - 2/10, n/30 – what does this mean? 2= percentage of the discount 10 = # of days discount is available n = Otherwise, the full amount is due 3- = # of days when full amount is due Events Affecting Sales Sale of inventory often includes:- Inventory returns- Purchase allowances- Cash discounts Ex. 1. JPS sold on account merchandise with a list price of $8,500. Payment terms were 1/20 n/ 30. The merchandise had cost JPS $51,100.- This is an asset source transaction - Increases assets (accounts receivable)- Increases equity ( sales revenue) - Using the net method: 8,500 * 99% = 8,415 Ex. 2. The customer in Ex 1 returned inventory with a $1,000 list price that JPS had sold with 1/10 n/30 payment terms. The merchandise had originally cost JPS $600.- This is an asset use transaction- Decrease assets (accounts receivable)- Decrease equity ( retained earnings)- Using the net method: 1,000* 99% = $990 Ex. 3. JPS collected the balance of the account receivable from the customer that purchased the goods in Ex 1 within the discount period. - This is an asset exchange transaction- Increases assets (cash)- Decreases assets (accounts receivable)- Paid within the discount period: 8,415-990 = 7,425 Ex. 4 JPS collected the balance of the account receivable from the customer that purchased the goods in Ex 1 but DID NOT within the discount period.- This is an asset exchange and source transaction- Increases assets (cash)- Decreases assets (accounts receivable)- Increases equity (interest revenue) Not paying within the discount period: Cash payment 7,425 + 75 = 7,500 Accounts Receivable 8,415 – 990 =
View Full Document
Unlocking...