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12 sell 50 items on account for 10 each terms fob

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12. Sell 50 items on account for $10 each,termsFOB destination. Each item cost $4.Transportation charges are $20 on account.DateAccountDebitCreditDateAccountDebitCredit11Merchandise Inventory50012Accounts Receivable500Accounts Payable500Sales500The purchaser does not record transportationcharges at all since terms are FOB destination.DateAccountDebitCredit12Cost of Merchandise Sold200Merchandise Inventory200DateAccountDebitCredit12Delivery Expense20Accounts Payable20The seller uses Delivery Expense to record transpor-tation charges only when terms are FOB destination.NOTE:If the information about the transportationsays the seller isbilledorinvoicedby UPS, creditAccounts Payable(as shown above.)If the informa-tion says the buyerpaidUPS, creditCashinstead.11. You pay the amount invoiced at the time ofthe purchase.11. Your customer pays you the amount invoicedfor the sale.AccountDebitCreditAccountDebitCreditAccounts Payable500Cash500Cash500Accounts Receivable500
Page | 93PRINCIPLES OF FINANCIAL ACCOUNTINGACCOUNTING CYCLE - MERCHANDISING BUSINESS2. Terms are FOB shipping The purchaser calls UPS to pick up the shipment fromthe seller’s loading dock. The purchaser is billed by UPS. Since the buyer isdealing with two different parties – the seller and the transportation company,the buyer records two journal entries.BUYERSELLER13. Purchase 50 items on account for $10each, termsFOB shipping. Transportationcharges are $20 on account.14. Sell 50 items on account for $10 each,termsFOB shipping. Each item cost $4.Transportation charges are $20 on account.DateAccountDebitCreditDateAccountDebitCredit13Merchandise Inventory50014Accounts Receivable500Accounts Payable500Sales500Receive an invoice from UPS for the shipping.DateAccountDebitCreditDateAccountDebitCredit13Merchandise Inventory2014Cost of Merchandise Sold200Accounts Payable20Merchandise Inventory200The purchaser uses Merchandise Inventory torecord transportation charges when terms are FOBshipping. Shipping becomes part of the cost of themerchandise. The first Accounts Payable is to theseller; the second one is to the shipping company.NOTE:If the information about the transportationsays the buyer isbilledorinvoicedby UPS, creditAccounts Payable(as shown above.)If the informa-tion says the buyerpaidUPS, creditCashinstead.The seller does not record transportation charges atall since terms are FOB shipping.11. You pay the amount invoiced to the vendor.(You do not pay the UPS invoice yet.)11. Your customer pays you the amount invoiced for thesale. Assume payment terms are 2/10, net 30 under thegross method.AccountDebitCreditAccountDebitCreditAccounts Payable500Cash500Cash490Sales Discounts10Merchandise Inventory10Accounts Receivable5003. Terms are FOB shipping As a courtesy and convenience, the seller calls UPSto pick up the shipment from his loading dock. The seller is billed by UPS andadds what UPS charges him to the purchaser’s invoice. When the purchaserpays his bill, he pays for the product and reimburses the seller for prepaying thetransportation for him.

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Term
Fall
Professor
NoProfessor
Tags
Accounting, Financial Accounting, Balance Sheet, Income Statement, Generally Accepted Accounting Principles, Double entry bookkeeping system

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