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Lecture_Notes_-_Assign_4

Sales discounts terms 210 n30 2 the amount of the

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Sales Discounts Terms 2/10, n/30 2 - the amount of the discount – 2% 10 - the number of days the customer has to pay the account to receive the discount n/30 – “net” – the full payment is due in 30 days The customer receives a 2% discount if paid within 10 days, the total amount is due in 30 days. Terms 1/20, n/45 A 1% discount if payment received within 20 days, the total amount is due in 45 days. Transportation FOB Destination – seller pays delivery costs FOB Shipping Point – purchaser pays delivery costs Discounts are never allowed on transportation costs. Notes: 1. Did the customer get the discount? June 10 th plus 10 days is June 20 th – last day discount is allowed is June 20 th – they got the discount. 2. The following is a good formula to follow to find cash: Sales price - returns Subtotal - discount (% * subtotal1) Net Sales + transportation costs (only include if FOB shipping point and seller pays) Cash Activity: Try these. January 2 nd , Sold merchandise on account for $3,000 terms 1/15, n/45, FOB shipping point. Cost of merchandise sold, $1,800. Transportation costs of $120 are to be paid by the seller and included in the invoice. January 3 rd , Merchandise of $1,000 was returned and a credit memorandum issued. Cost of merchandise returned, $700. January 16 th , Received cash for the amount due.
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Solution: Jan 2 nd Dr Accounts Receivable 3,000 Cr Sales 3,000 Dr Cost of Merchandise Sold 1,800 Cr Inventory 1,800 Dr Accounts Receivable 120 Cr Accounts Payable-trans 120 Jan 3 rd Dr Sales Returns & Allowances 1,000 Cr Accounts Receivable 1,000 Dr Inventory 700 Cr Cost of Merchandise Sold 700 Jan 16 th Dr Cash 2,100 Dr Sales Discounts 20 Cr Accounts Receivable 2,120 Note: 3,000 sales price - 1,000 return 2,000 - 20 discount (2,000*1% 1,980 net sales + 120 transportation 2,100 cash Remember that no discount is allowed on the transportation costs.
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Chapter 6 Perpetual - records the movement of inventory every time a sale or purchase occurs. Periodic - records inventory and cost of merchandise sold at the end of the accounting period. The number of units in the ending inventory is a solid, known number. The cost to assign to those units is not necessarily as clear cut. Costs paid for inventory can and do fluctuate throughout the year. The three main methods used to assign costs to inventory are LIFO and FIFO. LIFO – Last in, First out FIFO – First in, First out Weighted Average Inventory Formula Beginning Inventory + Purchases (minus returns and discounts), plus transportation = Available for sale -Ending Inventory =Cost of Merchandise Sold Periodic Inventory Steps: 1. Find total cost: units * cost per unit. This answer is also termed Available for Sale.
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