Acct 221 1st Edition Lecture 9 Outline of Last Lecture II Merchandising Businesses a Inventory b Gross Margin c Multi Step Income Statement d Cost of Goods Sold Outline of Current Lecture I Transportation Costs II Discounts III Sales Returns and Allowances Current 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 Discounts These 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 of the 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 7 425
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