ACCY 202 1st Edition Lecture 4 Outline of Last LectureI. FOB Shipping Point1. Definition2. Shipping Optionsi. “Prepaid”ii. “Collect”II. FOB Destination1. Definition2. Shipping Optionsi. “Prepaid”ii. “Collect”III. Why is Title Transfer Important?IV. Legal Title Transfer ChartV. Journal Entries for Seller and Buyer ChartOutline of Current LectureI. FOB Shipping Point- Freight Prepaid1. Date of Recording2. Shipping CostsII. Journal Entries1. Balance Sheet and Income StatementIII. Cash Payment1. Gross method2. Purchase DiscountCurrent LectureI. FOB Shipping Point- Freight Prepaid1. Date of Recording- The date is always recorded when the merchandise leaves the hands of the seller! Not when the goods were requested2. Shipping Costs- The buyer reimburses the seller since the seller prepaid for transportation costs, this will increase the inventory balance on the buyers booksThese 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.- The shipping will be capitalized by the buyerII. Journal Entries1. Balance Sheet and Income Statement- Remember debits to the left, credits to the right - All assets on the balance sheet increase by debits and things on the income statement increase by credit- The inventory on the Balance Sheet becomes cost of merchandise sold (COMS) on the Income Sheet, which is the same as cost of goods sold (COGS)III. Cash Payments - Below is the order of events that calculate the cash payment:Total owed for full orderLess: Returned Merchandise= Total owed before discountLess: Purchase Discount= Total owed after discount+/- Shipping Adjustment (if any)= Total owed after shipping1. Gross method- The discounts under the gross method is not recorded until the transaction happens. “Gross” means that all calculations have happened and it’s a manipulated number based on discounts and shipping costs2. Purchase Discount- The purchase discount is always the percentage discount times the “total owed before discount” (total owed for full order – returned