Financial Act Chpt 5 Notes

Financial Act Chpt 5 Notes - uapter S Merchandising...

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uapter S Merchandising Operations Inventory: Tangible property (current assets) held for sale in the normal course of business or will be used up in the production of goods to be sold in normal operations. Merchandisers: Have Merchandise Inventory on their balance sheet-Goods held for resale in the normal operations of the business. (Ex. Target, Sears, American Eagle-buy goods in finished form from wholesalers to sell in their stores). Reminder: Revenue recognition principle states that revenue must be: Earned —delivery has occurred or services have been rendered Persuasive evidence of an arrangement for customer payment (realized or realizable) • Price is fixed and determinable • Collection is reasonably assured Delivery: For sellers of goods, criteria of when to recognize revenue is when the risk of ownership is transferred to the customer. FOB Shipping Point: Title of goods and risk of ownership transfers to the customer at the time the merchandise is shipped. At this point, the Seller can record the revenue! FOB Destination: Title of goods and risk of ownership transfers to the customer once the goods are delivered to the customer. (Seller normally has paid for shipping, and risk of ownership stays with the Seller until the customer takes receipt of the goods).
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Financial Act Chpt 5 Notes - uapter S Merchandising...

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