ch05 WebCT - Chapter 5 Chapter Accounting for Merchandising...

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Chapter 5-1 Accounting for Merchandising Operations Chapter Chapter 5 5 ACCT 2111– Introductory Financial Accounting
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Chapter 5-2 Merchandising Operations Merchandising Operations Merchandising Companies Merchandising Companies Buy and Sell Goods Wholesaler Retailer Consumer The primary source of revenues is referred to as sales revenue or sales .
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Chapter 5-3 Merchandising Operations Merchandising Operations Income Measurement Income Measurement Illustration 5-1 Cost of goods sold is the total cost of merchandise sold during the period. Not used in a Service business. Net Income (Loss) Less Less Equal s Equal s Sales Revenue Cost of Goods Sold Gross Profit Operating Expenses
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Chapter 5-4 The operating cycle of a merchandising company ordinarily is longer than that of a service company . Operating Cycles Operating Cycles Illustration 5-2
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Chapter 5-5 FOB shipping point - seller places goods Free On Board the carrier, and buyer pays freight costs. FOB destination - seller places the goods Free On Board to the buyer’s place of business, and seller pays freight costs. Freight Costs Freight Costs Recording Purchases of Merchandise Recording Purchases of Merchandise * Freight costs incurred by the purchaser increases the Merchandise Inventory * Freight costs incurred by the seller on outgoing merchandise are an operating expense to the seller ( Freight-out or Delivery Expense). A pricing Terms
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Chapter 5-6 Terms 2/10, n/30: two-ten, net thirty 2% cash discount if payment is made within 10 days, or otherwise the entire balance is due within 30 days of the invoice Credit Terms Credit Terms Recording Sales of Merchandise Recording Sales of Merchandise
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Chapter 5-7 Purchaser may be dissatisfied because goods damaged or defective, of inferior quality, or do not meet specifications. Purchase Returns and Allowances
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ch05 WebCT - Chapter 5 Chapter Accounting for Merchandising...

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