ACCT ch5 Study Plan - Ch 5 ACCT study plan Pretest The...

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Ch 5 ACCT study plan Pretest: The periodic inventory system is used more commonly by companies that sell low-priced, high- volume merchandise Companies that sell low-priced, high volume merchandise are more likely to use the periodic inventory system. It simply requires a physical count of items on hand at the end of the accounting period and no detailed records are kept of inventory during the accounting period. The perpetual inventory system is more time consuming and expensive because it keeps track of the purchase and sale of each item in inventory. Losses of inventory are most easily identified using the perpetual inventory system. The periodic inventory system provides no means of identifying losses because the costs are automatically included in the cost of goods sold. The perpetual inventory syste m makes it easier to identify losses. Because the Merchandise Inventory account is constantly updated, any losses will show up as the difference between the balance in the account and the physical inventory taken at the end of the accounting period. Review pp. 290 - 295 Lexel Company sold goods for $1,000 with a 10 percent trade discount, terms 2/10, n/30. How much would Lexel receive if the account were paid within the discount period? $882 Nine-hundred dollars ($900) reflects the trade discount of 10%, but the sales discount of 2% was not subtracted from this price. The trade discount of 10% reduces the price of the goods to $900 [$1,000 - ($1,000 x .10)]. If the account were paid within the discount period, an additional 2% is subtracted from the $900 price and $882 [$900 - ($900 x .02)] would be received. Review pp. 296 - 298 A customer takes advantage of a 2 percent sales discount on a $400 purchase. The entry made by
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This note was uploaded on 03/28/2011 for the course ACCT 2301 taught by Professor G.a.gross during the Spring '11 term at Richland Community College.

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ACCT ch5 Study Plan - Ch 5 ACCT study plan Pretest The...

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