ACCT 200 Outline of Last Lecture I. Some EquationsII. EP-2III. 8-17IV. 8-18V. 8-22Outline of Current Lecture I. TermsII. Multi Step Income StatementIII. Slide 9 ProblemCurrent LectureI. Termsa. Merchandisers buy and sell goodsb. Selling expense—sales person salariesc. Administrative expense—janitors, secretaries, supplies expense, accountants, wages of warehouse personneld. Other income and other expense—non-core operationse. Sales returns and allowances—contra revenue subtracted from sales (negative balancei. Valuation accounts to accurately state the true sales amountf. Purchase returns and allowances—contra inventory subtracted from inventory on buyer’s balance sheeti. Not preset amountsnegotiated on situational basisThese 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.g. Sales discounts—contra revenue with negative balance; always subtracted from gross salesh. Purchase discounts—contra inventoryalways subtracted from buyer’s inventoryi. Discounts look like this “2/10 net 30”i. 2% discount offeredii. 10number of days amount should be paid in in order to receive discountiii. net 30the full payment is due within thirty days if not paid during the discount periodj. Buyer’s cost of inventory on balance sheet = cash actually paid for inventoryk. *MOST MISSED ON FINAL EXAMFREIGHT COSTi. FOB = “free on board”ii. FOB shipping point—shipping cost paid for by the buyeriii. FOB destination—shipping cost paid for by the selleriv. To remember this, think of the “shipping point” or “destination” as the time at which the ownership of property is switched. An item is always originally owned by the seller. If the ownership switches at the shipping point, then the buyer owns the item as it is en route. If the ownership does not switch until the item reaches its destination, then the owner stillowns the item while it is en route.II. Multi Step Income StatementRevenuei. Salesii. (Returns and allowances)iii. (Sales discounts)iv. = Net SalesExpensesv. (cost of merchandise sold expense)= Gross Profit (Net sales – cost of goods sold expense)—profit earned directly from selling of merchandisecontributes to covering a company’s other expenses– Operating Expensesvi. selling expensesvii. administrative expenses= Income from operations (core business)+ Other income (rent revenue)– Other expenses = Net IncomeIII. Slide 9 Problema. Buyer pays shipping4600 + 50 = $4650 (merchandise inventory on B/S)b. seller pays
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