Management 1A Lecture Notes (5)

Management 1A Lecture Notes (5) - Management 1A Lecture...

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Management 1A Lecture Notes Professor Gardner-Treloar Week 5
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Shipping Costs Who pays for shipping? FOB (free on board) shipping point – buyer pays FOB destination – seller pays The more “powerful” party passes the shipping on to the other, typically. -So let’s say Wal-Mart ordered inventory. The supplier will likely pay for the shipping (FOB destination) to keep their important client happy. -If you order something from Wal-Mart, you would likely have to pay shipping because as an average citizen, you are in no position to tell this corporate giant what to do. Capitalizing To capitalize means to put something on the balance sheet All costs incurred to get an asset is capitalized -This includes shipping -Book shipping as an asset -When the buy pays for shipping, it increases the cost of the purchase so merchandise inventory is debited Accidents Scenario: Nike loads shoes on to a truck to ship them to Footlocker. Along the way, there is an accident and the truck explodes. The shoes are destroyed. So who lost the inventory? Answer: It all depends on who paid shipping. If Nike paid shipping, Nike lost the inventory. If Footlocker paid shipping, Footlocker lost the inventory Closing Entries Steps -Close out temporary accounts with Cr Balances to income summary Sales Income Summary -Close out temporary account with Dr Balances to income (not drawings)
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This note was uploaded on 12/08/2011 for the course MGMT 1A taught by Professor Litt during the Spring '08 term at UCLA.

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Management 1A Lecture Notes (5) - Management 1A Lecture...

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