If purchases were made under terms of (a) trade discount of 20%, (b) credit terms of 2/10, n/30, and (c) shipping terms of FOB shipping point, freight collect, which of the following sentences are FALSE? a. The entity will pay for its freight-in on the purchase. b. The invoice price is only 80% of the list price. c. If the entity uses the perpetual inventory method, shipping cost would be recorded as a debit to Freight-in and a credit to cash. d. If the entity paid on the tenth day, it would only pay 98% of the invoice price.

If purchases were made under terms of (a) trade discount of 20%, (b) credit terms of 2/10, n/30, and (c) shipping terms of FOB shipping point, freight collect, which of the following sentences are FALSE? a. The entity will pay for its freight-in on the purchase. b. The invoice price is only 80% of the list price. c. If the entity uses the perpetual inventory method, shipping cost would be recorded as a debit to Freight-in and a credit to cash. d. If the entity paid on the tenth day, it would only pay 98% of the invoice price.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter7: Inventories: Cost Measurement And Flow Assumptions

Section: Chapter Questions

Problem 12GI: Consider each of the following independent situations. Should a company report the goods in its...

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An entity sells inventory with a list price of P10,000 under credit terms of 20%, 10%, 2/15, n/30. The entity uses PFRs 15 and estimates that only 80% of the cash discount will be taken. By the end of the reporting period, the account receivables are not yet settled and the entity changes its estimate of cash discount to be taken by 40%. Requirements: Provide the journal entry on the date of the sale and the year-end adjusting entry. Determine the amounts of net revenue and accounts receivable to be reported in the financial statements.
What is the nature of (a) a credit memorandum issued by the seller of merchandise and (b) a debit memorandum issued by the buyer of merchandise? Who bears the freight when the terms of sale are (a) FOB shipping point or (b) FOB destination? Office Outfitters Inc., which uses a perpetual inventory system, experienced an inventory shrinkage of $3,750. What accounts would be increased and decreased to record the adjustment for the inventory shrinkage at the end of the accounting period?
On June 1, 2023, AAA Company sold merchandise with an invoice price of 5,000,000 to a customer. The entity allowed trade discounts of 15%, and 10%. Credit terms were 3/10, n/30 and the sale was made FOB destination. AAA Company paid 100,000 of the delivery cost. a. Compute the total amount of purchases to be included on the buyer’s inventory in the determination of cost of goods available for sale if payment was made beyond the discount period. b. What is the full amount received by AAA company if payment was made on June 11, 2023?
Assume that Guardian Company uses a periodic inventory system and has these account balances: Purchases P600,000; Purchase Returns and Allowances P25,000; Purchase Discounts P11,000; and Freight-in P19,000; beginning inventory of P45,000; ending inventory of P55,000; and net sales of P750,000. Determine the cost of sales.
FN Trading recorded the following events involving a recent purchase of merchandise: Received goods for P45,000, terms 1/10, n/30. Returned P800 of the shipment for credit. Paid P300 freight on the shipment on terms FOB Destination Point. Paid the invoice within the discount period. How much is the net cost of purchases?
1. Under the perpetual inventory system, the Cost of Good Sold account is recorded … a. When purchases occur b. On a monthly basis c. When sales occur d. On an annual basis 2. Which of the following equations is false? a. Net Income = Gross Profit – Operating Expenses b. COGS = Cost of Goods Available for Sale – Ending Inventory c. Sales Revenue – COGS – Operating Expenses = Net Income d. Net Income = Operating Expenses + Gross Profit 3. Pinkan Company sells merchandise to Castle Corporation with terms FOB Shipping Point. In this case, the freight cost will be paid by … a. Pinkan Company b. Castle Corporation c. Shipping Company d. Pinkan Company and Castle Corporation 4. During 2020, Pearl Enterprises generated sales revenues of $85,000. The company’s expenses were as follows: cost of goods sold of $30,000, operating expenses of $13,000 and a loss on the sale of equipment of $9,000. Pearl’s gross profit is … a. $55,000 b. $42,000 c. $33,000 d. $64,000 5.…
MM Co. has the following information pertaining to its merchandise inventory as of December 31, 2020: Inventory on Hand (including inventory on consignment of P20,000) P200,000 Inventory purchased with the right of return P100,000 Merchandise purchased in transit, FOB shipping point P160,000 Merchandise sold in transit, FOB destination P247,000 Merchandise not in warehouse, held by the consignee P183,000. What amount should MM Co. report as the value of its inventory in its 2020 balance sheet? A. P749,000 B. P760,000 C. P770,000 D. P876,000 E. answer not given
MM Co. has the following information pertaining to its merchandise inventory as of December 31, 2020: Inventory on Hand (including inventory on consignment of P20,000) P200,000 Inventory purchased with the right of return P100,000 Merchandise purchased in transit, FOB shipping point P160,000 Merchandise sold in transit, FOB destination P247,000 Merchandise not in warehouse, held by the consignee P183,000. What amount should MM Co. report as the value of its inventory in its 2020 balance sheet?
On September 1, ABC Company purchased P950,000 of inventory items on credit with the terms 1/15, net 30, FOB destination. Freight charges were P2,000. Payment for the purchase was made on September 18. Assuming ABC Company uses the perpetual inventory system and the net method of accounting for purchase discounts. What amount recorded on September 1 as accounts payable from this purchase?
Lychee Company uses the retail method of inventory valuation. The following information is available:Beginning inventory: P186,196 at cost; P302,250 at retailPurchases: P703,740 at cost; P1,120,000 at retailFreight in: P12,400Purchase discounts: P14,400Purchase returns: P25,050 at cost; P48,300 at retailNet additional markups – P100,000 Net markdowns – P205,000Sales revenue – P900,000What is the estimated cost of the ending inventory using the average retail?
Charleston Company has elected to use the dollar-value LIFO retail method to value its inventory. The following data has been accumulated from the accounting records: Cost Retail Merchandise inventory, January 1, 2021 $ 361,760 $ 560,000 Net purchases 685,832 1,026,000 Net markups 14,600 Net markdowns 4,600 Net sales 683,000 Pertinent retail price indexes: January 1, 2021 1.00 December 31, 2021 1.10 Required:Estimate the ending inventory for December 31, 2021. (Round "Cost-to-retail percentage" to 2 decimal places.) Estimated ending inventory (At Retail) Estimated ending inventory (At Cost)
Garcia Company is trying to decide whether to purchase identical inventory from one of the following suppliers. Cost Invoice terms Shipping terms Shipping cost Supplier A $280 1/10, n/30 FOB shipping point $28 Supplier B $290 2/10, n/30 FOB destination $30 Required: Assume the company will pay within the discount period. What is the actual cost of the inventory if purchased from each supplier?