acc6ch05 - Merchandising Operations and the Accounting...

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Merchandising Operations and the Accounting Cycle Chapter 5
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Service Co. Income Statement Year ended June 30, 20xx Service revenue $xxx Expenses: Salary expense x Depreciation expense x Income tax expense x Net income $ xx Service Co. Income Statement Year ended June 30, 20xx Service revenue $xxx Salary expense x Depreciation expense x Income tax expense x Net income $ xx Merchandising Co. Income Statement Year ended June 30, 20xx Sales revenue $xxx Cost of goods sold x Gross profit xx Operating expenses: Salary expense x Depreciation expense x Net income $ xx Merchandising Co. Year ended June 30, 20xx Sales revenue $xxx Cost of goods sold x Gross profit xx Operating expenses: Salary expense x x Net income $ xx Income Statements
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Account for the purchase of inventory. Objective 1
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Purchase of Inventory Merchant prepares purchase order Suppliers send merchandise and a bill Compares
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Purchase of Inventory Example On May 1, the Sporting Store acquired on account $2,000 of various items for resale. The supplier sent the merchandise along with a bill stating the quantity, price, and terms of sale. What is the journal entry?
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May 1 Inventory $2,000 Accounts Payable $2,000 Purchased inventory on account Inventory Accounts Payable 2,000 2,000 Purchase of Inventory Example
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Recording Purchase Returns and Allowances Example Assume that on May 4 a $100 item was returned prior to payment of the invoice. What is the journal entry? May 4 Accounts Payable 100 Inventory 100 Merchandise was returned
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Recording Purchase Returns and Allowances Example Assume that one of the items of merchandise is slightly damaged, and the store was given a $10 allowance. What is the journal entry? May 4 Accounts Payable 10 Inventory 10 Received a purchase allowance
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Recording Purchase Returns and Allowances Example Inventory 2,000 100 10 Bal. 1,890 Accounts Payable 100 2,000 10 Bal. 1,890
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Purchase Discounts Credit terms are stated in expressions such as: 2/10, N/30 , meaning that a discount of 2% is allowed if the invoice is paid within 10 days; otherwise the full (net) amount is due within 30 days.
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Purchase Discounts Example Assume the Sporting Store purchased
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This note was uploaded on 03/08/2012 for the course ACC 4304 taught by Professor Ralultapia during the Spring '10 term at Texas State.

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acc6ch05 - Merchandising Operations and the Accounting...

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