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Determining cost of purchase The following is an excerpt from a conversation between Mark Loomis and Krista Huff. Mark is debating whether to buy a stereo system from Tru-Sound Systems, a locally owned electronics store, or Wholesale Stereo, an online electronics company. Mark: Krista, I don ‘t know what to do about buying my new stereo. Krista: What’s the problem? Mark: Well, I can buy it locally at Tru -Sound Systems for $1,175.00. However, Wholesale Stereo has the same system listed for $1,200.00. Krista: What’s the big deal? Buy it from Tru-Sound Systems. Mark: It ‘s not quite that simple. Wholesale Stereo charges $49.99 for shipping and handling. If I have them send it next-day air, it’ll cost $89.99 for shipping and handling. Krista: So? Mark: But, that’s not all. Tru-Sound Systems will give an additional 2% discount if I pay cash. Otherwise, they will let me use my VISA, or I can pay it off in three monthly installments. In addition, if I buy it from Tru-Sound Systems, I have to pay 9% sales tax. I won’t have to pay sales tax if I buy it from Wholesale Stereo, since they are out of state. Krista: Anything else??? Mark: Well ... Wholesale Stereo says I have to charge it on my VISA. They don’t accept checks. Krista: I am not surprised . Many on line stores don ‘t accept checks. Mark: I give up. What would you do? 1. Assuming that Wholesale Stereo doesn’t charge sales tax on the sale to Mark, which company is offering the best buy? 2. What might be some considerations other than price that might influence Mark’s decision on where to buy the stereo system?

BuyFind

Accounting (Text Only)

26th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781285743615
BuyFind

Accounting (Text Only)

26th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781285743615

Solutions

Chapter
Section
Chapter 6, Problem 6.3CP
Textbook Problem

Determining cost of purchase

The following is an excerpt from a conversation between Mark Loomis and Krista Huff. Mark is debating whether to buy a stereo system from Tru-Sound Systems, a locally owned electronics store, or Wholesale Stereo, an online electronics company.

Mark: Krista, I don ‘t know what to do about buying my new stereo.

Krista: What’s the problem?

Mark: Well, I can buy it locally at Tru -Sound Systems for $1,175.00. However, Wholesale Stereo has the same system listed for $1,200.00.

Krista: What’s the big deal? Buy it from Tru-Sound Systems.

Mark: It ‘s not quite that simple. Wholesale Stereo charges $49.99 for shipping and handling. If I have them send it next-day air, it’ll cost $89.99 for shipping and handling.

Krista: So?

Mark: But, that’s not all. Tru-Sound Systems will give an additional 2% discount if I pay cash. Otherwise, they will let me use my VISA, or I can pay it off in three monthly installments. In addition, if I buy it from Tru-Sound Systems, I have to pay 9% sales tax. I won’t have to pay sales tax if I buy it from Wholesale Stereo, since they are out of state.

Krista: Anything else???

Mark: Well ... Wholesale Stereo says I have to charge it on my VISA. They don’t accept checks.

Krista: I am not surprised . Many on line stores don ‘t accept checks.

Mark: I give up. What would you do?

1. Assuming that Wholesale Stereo doesn’t charge sales tax on the sale to Mark, which company is offering the best buy?

2. What might be some considerations other than price that might influence Mark’s decision on where to buy the stereo system?

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Chapter 6 Solutions

Accounting (Text Only)
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Ch. 6 - A Gross profit During the current year,...Ch. 6 - Gross profit During the current year, merchandise...Ch. 6 - Purchases transactions Halibut Company purchased...Ch. 6 - Purchases transactions Hoffman Company purchased...Ch. 6 - Sales transactions Journalize the following...Ch. 6 - Sales transactions Journalize the following...Ch. 6 - Sales transactions Journalize the following...Ch. 6 - Sales transactions Journalize the following...Ch. 6 - Transactions for buyer and seller Sather Co. sold...Ch. 6 - Transactions for buyer and seller Shore Co. sold...Ch. 6 - Inventory shrinkage Castle Furnishings Companys...Ch. 6 - Inventory shrinkage Hahn Flooring Companys...Ch. 6 - Ratio of sales to assets Financial statement data...Ch. 6 - Ratio of sales to assets Financial statement data...Ch. 6 - Determining gross profit During the current year,...Ch. 6 - Determining cost of merchandise sold For a recent...Ch. 6 - Chart of accounts Monet Paints Co. is a newly...Ch. 6 - Purchase-related transactions The Stationery...Ch. 6 - Purchase-related transactions A retailer is...Ch. 6 - Purchase-related transactions The debits and...Ch. 6 - Purchase-related transactions Warwicks Co.. a...Ch. 6 - Purchase-related transactions Journalize entries...Ch. 6 - Sales-related transactions, including the use of...Ch. 6 - Customer returns and allowances Zell Company had...Ch. 6 - Sales-related transactions After the amount due on...Ch. 6 - Sales-related transactions The debits and credits...Ch. 6 - Sales-related transactions Merchandise is sold on...Ch. 6 - Determining amounts to be paid on invoices...Ch. 6 - Sales-related transactions Showcase Co., a...Ch. 6 - Purchase-related transactions Based on the data...Ch. 6 - Sales tax A sale of merchandise on account for...Ch. 6 - Sales tax transactions Journalize the entries to...Ch. 6 - Normal balances of merchandise accounts What is...Ch. 6 - Income statement and accounts for merchandiser For...Ch. 6 - Income statement for merchandiser The following...Ch. 6 - Determining amounts for items omitted from income...Ch. 6 - Multiple-step income statement On October 31,...Ch. 6 - Multiple-step income statement Identify the errors...Ch. 6 - Single-step income statement Summary operating...Ch. 6 - Adjusting entry for merchandise inventory...Ch. 6 - Closing the accounts of a merchandiser From the...Ch. 6 - Closing entries; net income Based on the data...Ch. 6 - Closing entries On July 31, 2016, the balances of...Ch. 6 - Ratio of sales to assets The Home Depot reported...Ch. 6 - Ratio of sales to assets Kroger, a national...Ch. 6 - Rules of debit and credit for periodic inventory...Ch. 6 - Journal entries using the periodic inventory...Ch. 6 - Appendix Identify items missing in determining...Ch. 6 - Appendix Cost of merchandise sold and related...Ch. 6 - Appendix Cost of merchandise sold Based on the...Ch. 6 - Appendix Cost of merchandise sold Based on the...Ch. 6 - Appendix Cost of merchandise sold Identify the...Ch. 6 - Appendix Closing entries using periodic inventory...Ch. 6 - Purchase-related transactions using perpetual...Ch. 6 - Sales-related transactions using perpetual...Ch. 6 - Sales-related and purchase-related transactions...Ch. 6 - Sales-related and purchase-related transactions...Ch. 6 - Multiple-step income statement and report form of...Ch. 6 - Single-step income statement and account form of...Ch. 6 - Purchase-related transactions using periodic...Ch. 6 - Sales-related and purchase-related transactions...Ch. 6 - Appendix Sales-related and purchase-related...Ch. 6 - Appendix Periodic inventory accounts,...Ch. 6 - Purchase-related transactions using perpetual...Ch. 6 - Sales-related transactions using perpetual...Ch. 6 - Sales-related and purchase-related transactions...Ch. 6 - Sales-related and purchase-related transactions...Ch. 6 - Multiple-step income statement and report form of...Ch. 6 - Single-step income statement and account form of...Ch. 6 - Purchase-related transactions using periodic...Ch. 6 - Sales-related and purchase-related transactions...Ch. 6 - Appendix Sales -related and purchase-related...Ch. 6 - Appendix Periodic inventory accounts,...Ch. 6 - Palisade Creek Co. is a merchandising business...Ch. 6 - Ethics and professional conduct in business On...Ch. 6 - Purchases discounts and accounts payable Rustic...Ch. 6 - Determining cost of purchase The following is an...

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