Recording inventory with discounts available.Greystoke, Inc. is owned by twin brothers. On most issues, they agree completely with eacother. One particular problem, though, is giving them trouble. Galen wants to use the grommethod for recording purchases of merchandise with discounts while Gordon thinks the onlogical method is the net method. To help them resolve their problems, they need to see thinformation each method gives them and get some feedback on what they can learn from eacmethod. You have the honor of being chosen. Provide journal entries to record each activity feboth the gross and net methods. Be sure to label the methods. The entries can be side by side fethe two inventory methods. Assume the brothers use the periodic inventory system.May 2GrossPurchased and received $15.000 of merchandise, terms 1/15, n/45.lurchase 15,000cush 14,850Net15,000Purchas 14,85dAcct PayPurchas dis 150us5May 5GrossReturned merchandise with a cost of $500 because we could not use it.NetPaid for $10,000 of the merchandise.NetMay 16GrossPaid for the remainder of the merchandise.une 12GrossNet

Record journal entries for purchase of merchandise received using gross and net method as shown…

Answered: Recording inventory with discounts…

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter6: Merchandising Transactions

Section: Chapter Questions

Problem 5TP: You own a clothing store and use a periodic inventory system. Research like companies in the...

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You have decided to open up a small convenience store in your hometown. As part of the initial set-up process, you need to determine whether to use a perpetual inventory system or a periodic inventory system. Write an evaluation paper comparing the perpetual and periodic inventory systems. Describe the benefits and challenges of each system as it relates to your industry and to your business size. Compare at least one example transaction using the perpetual and periodic inventory systems (a purchase transaction, for example). Research and describe the impact each system has on your financial statements. Decide which system would be the best fit for your business, and support your decision with research.
AZO Co. currently uses a periodic inventory system. Mr. Sohaim, the owner, is consideringthe purchase of a computer system that would make it feasible to switch to a perpetualinventory system. Mr. Hasan is unhappy with the periodic inventory system because it doesnot provide timely information on inventory levels. Mr. Hasan has noticed on severaloccasions that the store runs out of good-selling items, while too many poor-selling itemsare on hand. Mr. Hasan is also concerned about lost sales while a physical inventory is beingtaken. AZO Co. currently takes a physical inventory twice a year. To minimize distractions,the store is closed on the day inventory is taken. Mr. Hasan believes that closing the store isthe only way to get an accurate inventory count.1. Will switching to a perpetual inventory system strengthen AZO Co.’s control overinventory items?2. Will switching to a perpetual inventory system eliminate the need for a physicalinventory count?3. How IAS-2 is applicable here?
Which of the following statements relative to book (perpetual) inventory systemsIs false?a. Use of book inventory system allows a retailer to know at all times the value ofinventory on hand without having to take a physical inventory.b. Book inventory systems can be maintained on either a retail dollar or a costdollar basis.c. Cost dollar control is used more in retailing than retail dollar control.d. A cost dollar control system is used when merchandise is of an unusually high unitvalue and there are relatively few transactions.e. When using a cost system, it is not possible to record additional markups andreductions because all the figures in the cost system are in cost dollars.
WalMart and other retailers have computerized cash registers to ring up sales. How does this feature help these firms manage inventory? Purchase prices change over time. When ordering inventory to replace what has been sold, the purchasing agent might find a price increase. Discuss and explain one of the following: First in First Out Last in First Out Weighted Average Cost Specific Identification Lower of Cost or Market
A store engaged in reselling jewelries would least likely employ which inventory system? a. EOQ b. Two-bin method c. Just in time d. ABC system 7. A grocery store owner selling low value items would be the most interested in this inventory management system: a. EOQ b. Two-bin method c. Just in time d. ABC system 8. Components of a firm’s cash conversion cycle include: a. Average collection period, average age of inventory b. Average payment period, average collection period c. Average age of inventory and average payment period d. Average of age inventory, average collection period and average payment period 9. Which of the following statements is correct with regard to the use of a lockbox system? a. It reduces mail float and clearing float but not payment float. b. It reduces all components of a float. c. It reduces payment and mail float but not clearing float. d. It increases all…
Triple Creek Hardware Store currently uses a periodic inventory system. Kevin Carlton, the owner, is considering the purchase of a computer system that would make it feasible to switch to a perpetual inventory system.Kevin is unhappy with the periodic inventory system because it does not provide timely information on inventory levels. Kevin has noticed on several occasions that the store runs out of good-selling items, while too many poor-selling items are on hand.Kevin is also concerned about lost sales while a physical inventory is being taken. Triple Creek Hardware currently takes a physical inventory twice a year. To minimize distractions, the store is closed on the day inventory is taken. Kevin believes that closing the store is the only way to get an accurate inventory count. Will switching to a perpetual inventory system strengthen Triple Creek Hardware’s control over inventory items? Will switching to a perpetual inventory system eliminate the need for a physical inventory…
Tracing the Inventory Count. You have been assigned to trace the results of the observation of Brightware China’s physical inventory count to its pricing and compilation. You note the following conditions.1. The last inventory tag documented by Mark Hulse, the auditor who observed the inventory, was 1732, but you notice a number of items with count ticket numbers higher than 1732. You contact the client’s controller, Marcia Vines, who tells you the client found a storage room full of a new product that Brightware had just produced and added it to the inventory. 2. The count tickets recorded by Hulse agree to the inventory list, but some of the other count tickets you select are substantially different from it. Vines tells you these are input errors and she will have them corrected. 3. Hulse described several boxes of goods as being dusty and even broken. They are included in the inventory at cost. Vines’s explanation is that china never “goes bad” and the goods themselves were not…
(Inventoriable Goods and Costs) Clay Mattews, an inventory control specialist, is interested in better understanding the accounting for inventories. Although Clay understands the more sophisticated computer inventory control systems, he has little knowledge of how inventory cost is determined. In studying the records of Strider Enterprises, which sells normal brand-name goods from its own store and on consignment through Chavez Inc., he asks you to answer the following questions.Instructions(a) Should Strider Enterprises include in its inventory normal brand-name goods purchased from its suppliers but not yet received if the terms of purchase are f.o.b. shipping point (manufacturer’s plant)? Why?(b) Should Strider Enterprises include freight-in expenditures as an inventory cost? Why?(c) If Strider Enterprises purchases its goods on terms 2/10, net 30, should the purchases be recorded gross or net? Why?(d) What are products on consignment? How should they be reported in the financial…
Sales revenue is generated by the sale of inventory. Companies can choose between the perpetual and the periodic system to account for the inventory. Please discuss the difference between the two accounting processes and explain how one would be the best choice for a company that makes Televisions. Discuss the reason why one accounting method might be preferred over the other or could both be used properly for a company that makes televisions. What factors were used to determine the best choice supporting your selection. Provide another product that would best be accounted for using the system you did not select and explain what features of the product or merchandise, in your opinion, are the drivers for the opposite method.
Please answer with reason for all why the option is correct and why the other options are incorrectPlease answer correct otherwise skip it When preparing the worksheet for a merchandising business using the perpetual inventory system,which of the following is not a new merchandising account that is shown on the worksheet?A) Accumulated Depreciation — BuildingB) Sales Returns and AllowancesC) Cost of Goods SoldD) Merchandise Inventory
Assume the perpetual inventory system is used unless stated otherwise. Round all numbers to the nearest whole dollar unless stated otherwise. Comparing periodic and perpetual inventory systems For each statement below, identify whether the statement applies to the periodic inventory system, the perpetual inventory system, or both. a. Normally used for relatively inexpensive goods. b. Keeps a running computerized record of merchandise inventory. c. Achieves better control over merchandise inventory. d. Requires a physical count of inventory to determine the quantities on hand. e. Uses bar codes to keep up-to-the-minute records of inventory.
A company is trying to set up proper internal controls for their accounts payable/inventory purchasing system. Currently the purchase order is generated by the same person who receives the inventory. Together the purchase order and the receiving ticket are sent to accounts payable for payment. What changes would you make to improve the internal control structure? A. No changes would be made since the person paying the bills is different from the person ordering the inventory. B. The person in accounts payable should generate the purchase order. C. The person in accounts payable should generate the receiving ticket once the invoice from the supplier is received. D. The responsibilities of generating the purchase order and receiving the inventory should be separated among two different people.

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