Chapter 5 - 2/10,N/30 2/10, two percent discount if paid in...

Info iconThis preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 5 Inventory is an asset. It is short term, and current. Will be converted to cash within 12 months. Appendix describes perpetual further. In a perpetual system, the inventory is always updated. So when you look at the ledger it will reflect the current co Except for stolen items, broken ones, etc. At year end, a physical count should be done. Inventory Cash 1. Selling 1/2 of inventory 5000 2500 5000 Debit 2500 Cash 4000 Sales CGS (EXP) 2500 Inventory 300 Cash FOB (Free On Board) FOB destination It is the manufacturers obligation to get the product to the desired point. FOB shipping The retailer owns the product at the time of shipment. Gross Sales and Purchases Contra accounts Merchandise returned, price adjustments (allowances). Set up as their own ledger accounts without affecting sales directly. Sales 4000 Sales Inventory Less R&A -300 4000 5000 Net 3700 Less CGS 2500 Debit Credit A/R 4000 Sales 4000 CGS 2500 Inventory 2500 Incentive to pay sooner
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 4
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 6
Background image of page 7
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 2/10,N/30 2/10, two percent discount if paid in 10 days N/30, No discount if paid in 30 days Cash 3920 Sales Disounts 80 A/R 4000 ost of items on hand. Credit *Can also be accts rec instead of cash 4000 2500 300 200 Stopping periodically to look at the status of inventory. Inv Purchases As inventory goes down the additional purchs 5000 10000 Purchases 10000 A/P 10000 At the end of the year the inventor is physical BI 5000 Purchases 10000 Avail. Inv 15000 EI-2000 Ending inve CG SOLD 13000 Inv Purchases At year end an adjusting entry needs to be m 5000 3000 10000 10000 2000 CGS 13000 Inv 3000 Purchases 1000 sed inventory is added in its own account. lly counted entory @ 2000 so we need to credit inventory for 3000 to make ending balance 2000 ade Inventory Turn Over Ratio INV T O = CGS AVG INV = 35000 3000 = 10 number of times you turn over your inventory...
View Full Document

Page1 / 7

Chapter 5 - 2/10,N/30 2/10, two percent discount if paid in...

This preview shows document pages 1 - 7. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online