ACCY 202 1st Edition Discussion - Lecture 3 Outline of Last LectureI. Inventory1. Definitioni. Merchandise Inventoryii. Manufacturing InventoryII. Balance Sheet vs. Income Statement1. Balance Sheet2. Income Statement3. How things transferIII. Recording Merchandise Purchases – 4 events to considerIV. Purchase Contract1. Trade Discount2. Purchase DiscountOutline of Current Discussion LectureI. FOB Shipping Point1. Definition2. Shipping Optionsi. “Prepaid”ii. “Collect”II. FOB Destination1. Definition2. Shipping OptionsThese 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.i. “Prepaid”ii. “Collect”III. Why is Title Transfer Important?IV. Legal Title Transfer ChartV. Journal Entries for Seller and Buyer ChartCurrent LectureI. FOB Shipping Point1. Definition: When title transfers at Point A when the goods leave the sellers facility. This would mean that the buyer has legal title over the goods as they are in transport.2. Shipping Optionsi. “Prepaid”Buyer must reimburse the sellerii. “Collect”The buyer pays the carrier directlyII. FOB Destination1. Definition: When title transfers at Point B when the goods arrive at the buyers facility. This means that the seller has legal title over the goods as they’re in transport.2. Shipping Optionsi. “Prepaid”Buyer does nothing because the seller was supposed to and did pay for transportationii. “Collect”Buyer reduces amount paid to the seller because the buyer was not supposed to pay for shipping costs.III. Why is Title Transfer Important?- Possible Damage/loss during transit- Recording transaction date- Accounting for purchase discount- Shipping cost: who’s ultimately responsible?IV. Legal Title Transfer ChartShipping Point Seller Destination  BuyerPrepaid  Seller Buyer reimburseInventory CostBuyer ResponsibleSelling cost for sellerCollect  Buyer Inventory Cost Buyer self-reimburseSeller ResponsibleSelling cost for sellerV. Journal Entries for Seller and BuyerShipping Point  Seller Destination  BuyerPrepaid  Seller Merchandise Inv.: DebitAccounts Payable: CreditNothingCollect  Buyer Merchandise Inv.: DebitCash: CreditAccounts Payable: DebitCash: