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Accounting 2000 9-30

Accounting 2000 9-30 - -ownership passes when goods reach...

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Accounting 2000 9/30/11 Inventory- considered merchandising company Merchandising Company -buy and sell goods -income measurement (accounts) Sales revenue Cost of goods sold (expense) Gross profit Operating expenses Net income Operating cycles - cycle of merchandising company ordinarily is longer than that of a service company Perpetual system - detailed record of the cost of each inventory purchase and sale -constantly update the cost of your inventory Periodic system - don’t keep detailed records of goods on hand -cost of goods sold determined by count at the end of the accounting period -physical count at the end of the period -no way to account shoplifting (shrinkage) “FOB”- Free on board FOB shipping point -buyer pays freight
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Unformatted text preview: -ownership passes when goods reach shipping board FOB Destination-seller pays freight Under perpetual inventory system, when a buyer pays the freight, that is a cost of inventory *therefore, increase merchandising inventory Freight costs incurred by the seller are an operating expense CLICKER: the Shoe Box paid freight of $300 on the purchase of merchandise. What account would be debited by Shoe Box? 1. Freight-in 2. Freight expense 3. Freight-out 4. Inventory Purchase returns and allowances Purchase return- credit or cash Purchase allowance- keep merchandise and reduce what you owe Purchase discounts 1. Purchaser saves money 2. Shortens seller operating cycle *THE SLIDES FROM CLASS ARE ON MOODLE...
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