Concept explainers
F.O.B (Free On Board) Shipping Point: Under this system, the responsibility of the seller over the goods ends once the goods are out of the warehouse. The buyer takes the responsibility of the delivery of the goods to his/her location. The legal title of the goods is transferred from the seller to the buyer, once the goods are out of the seller’s warehouse, regardless to the goods reached at buyer’s location.
F.O.B Destination Point: Under this system, the seller is responsible for the transfer of the goods from the warehouse to the customer’s destination. The legal title of the goods is transferred from the seller to the buyer, once the goods are delivered at the buyer’s place.
the correct inventory amount to be reported in K’s 2018 balance sheet.
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INTERMEDIATE ACCT VOL.2>CUSTOM<
- Ma4. Question 42. The cost of inventory that has been sold to customers is called: A. cost of goods sold, and it appears on the income statement. B.inventory, a current asset that appears on the balance sheet. C.inventory, a current asset that appears on the income statement. D.cost of goods sold, and it appears on the balance sheet. Question 43. ABC Company sold $120,000 of goods and accepted the customer's $120,000 10%, 1- year note in exchange. Assuming 10% approximates the market rate of return, how much interest would be recorded for the year ending December 31 if the sale was made on June 30? A.12,000 B. 3,000 C.0 D. 6,000 Question 44 Under the allowance method of recognizing uncollectible accounts, the entry to write off an uncollectible account A.increases the allowance for uncollectible accounts. B.has no effect on the allowance for uncollectible accounts. C.decreases net income. D. has no effect on net income.arrow_forwardP6.11 (LO 6), AP Rayre Books uses the retail inventory method to estimate its monthly ending invento- ries. The following information is available for two of its departments at October 31, 2022. Hardcovers Paperbacks Cost Retail Cost Retail Beginning inventory $ 420,000 $ 640,000 $ 280,000 $ 360,000 Purchases 2,135,000 3,200,000 1,155,000 1,540,000 Freight-in 24,000 12,000 Purchase discounts 44,000 22,000 Net sales 3,100,000 1,570,000 At December 31, Rayre Books takes a physical inventory at retail. The actual retail values of the inven- tories in each department are Hardcovers $744,000 and Paperbacks $335,000. Instructions a. Determine the estimated cost ofthe ending inventory for each department at October 31, 2022, using the retail inventory method. b. Compute the ending inventory at cost for each department atDecember 31, assuming the cost-to- retail ratios for the year are 65% for Hardcovers and 75% for Paperbacks.arrow_forwardHW Q 2 Current Attempt in Progress On June 10, Sunland Company purchased $ 10,000 of merchandise on account from Marigold Company, FOB shipping point, terms 1/10, n/30. Sunland pays the freight costs of $ 420 on June 11. Damaged goods totaling $ 300 are returned to Marigold for credit on June 12. The fair value of these goods is $ 75. On June 19, Sunland pays Marigold Company in full, less the purchase discount. Both companies use a perpetual inventory system. (a) Prepare separate entries for each transaction on the books of Sunland Company. (Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit choose a transaction date enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount…arrow_forward
- Exhibit7.5 Sullivan Produce Co. switched from FIFO to LIFO on January1,2018, for external reporting and income tax purposes, while retaining FIFO for internal reports. On that date, the FIFO inventory equaled $360,000. The ensuing three-year period resulted in the following: December31,2018 Year-End Costs $438,000 Cost Index 1.05 December 31,2019 Year-End Costs $460,000 Cost Index 1.15 December 31, 2020 Year-End Costs $520,000 Cost Index 1.25 Refer to Exhibit 7-5, The ending inventory at December 31,2020, using the dollar-value LIFO method would be a. $422,000 b. $402,000 c $426,000 d. $420,400 Refer to Exhibit7-5, the ending inventory at December 31,2019, at base-year price is: a.$400,000 b. $402,000 c.$406,000 d.$424,000arrow_forwardPB13. LO 3.5Post the following November transactions to T-accounts for Accounts Payable, Inventory, and Cash, indicating the ending balance. Assume no beginning balances in Accounts Payable and Inventory, and a beginning Cash balance of $21,220. purchased merchandise inventory on account, $9,900 paid vendors for part of inventory purchased earlier in month, $6,500 purchased merchandise inventory for cash, $4,750arrow_forwardBUS 038 : Business Computations13 Which type of discount (trade discount or cash discount) is given as an incentive to pay the seller promptly? 14. Series discounts are a form of trade discount. (T or F) For Problems 15-19 assume that you purchase goods with a list price of $455 and a trade discount of 25%. The invoice is dated October 3 with terms of 3/15, n/45. 15. What is the net price after trade discount?arrow_forward
- Problem 13On the December 31, 2020 balance sheet of Mann Co., the current receivables consisted ofthe following:Trade accounts receivable 93,000Allowance for uncollectible accounts (2,000)Claim against shipper for goods lost in transit (November 2020) 3,000Selling price of unsold goods sent by Mann on consignment at130% of cost (not included in Mann’s ending inventory) 26,000Security deposit on lease of warehouse used for storing some inventories 30,000Total 150,000On December 31, 2020, the correct total of Mann’s current net receivables was _________. Problem 14The following information relates to Jay Co.’s accounts receivable for 2020:Accounts receivable, 1/1/20 650,000Credit sales for 2020 2,700,000Sales returns for 2020 75,000Accounts written off during 2020 40,000Collections from customers during 2020 2,150,000Estimated future sales returns at 12/31/20 50,000Estimated uncollectible accounts at 12/31/20 110,000What amount should Jay report for accounts receivable, before allowances…arrow_forwardMF2 9 Purchased merchandise from Keene Co. for $9,100 under credit terms of 2/15, n/60, FOB destination. Analysis Component: As the senior purchaser for Belton Company, you are concerned that the purchase discounts you have negotiated are not being taken advantage of by the accounts payable department. Calculate the cost of the lost discount regarding the July 9 purchase. Assume a 6% interest rate. (Do not round intermediate calculations. Round your final answer to 2 decimal places. Assume 365 days a year.)arrow_forwardPROBLEM 17: The following information relates to NNN , Inc. which accidentally met a fire on the night of January 19, 2023: Inventory, July 1, 2022 P 51,600 Purchases, July 1, 2022 to January 19, 2023 368,000 Sales, July 1, 2022 to January 19, 2023 583,000 Purchase returns 11,200 Purchase discounts taken 5,800 Freight in 3,800 Sales returns 8,600 The fire destroyed the entire inventory except for purchases in transit, FOB shipping point of P2,000 and goods having selling price of P4,900 that were salvaged from the fire. The average gross profit rate on net sales is 40%. 22. Compute for the cost of inventory lost in the fire.arrow_forward
- 29.ABC Corp bought goods for P25000. Terms : 2%, 3% 2/10, n/30 FOB Shipping point Freight Prepaid. Freight related to the purchase was P1,000. How much is the accounts payable under the gross method? 22,290 22,765 24,290 24,765arrow_forwardE6.14 (LO 3), AP Deere & Company is a global manufacturer and distributor of agricultural, construction, and forestry equipment. The company reports inventory and cost of goods sold using the LIFO method. Suppose it reported the following information in its 2025 annual report. (in millions) 2025 2024 Inventories (LIFO) $2,397 $3,042 Current assets 30,857 Current liabilities 12,753 1,367 16,255 LIFO reserve Cost of goods sold Instructions a. Compute Deere's inventory turnover and days in inventory for 2025. (Round inventory turnover to 2 decimal places.) b. Compute Deere's current ratio using the 2025 data as presented, and then again after adjusting for the LIFO reserve. c. Comment on how ignoring the LIFO reserve might affect your evaluation of Deere's liquidity. Idi bried FIEO LIFO and average cost and evaluate impact on gross profilarrow_forwardPROBLEM 6: XXX Company is preparing its 2021 financial statements. Prior to any adjustments, inventory is valued at P1,605,000. The following information has been found relating to certaininventory transactions from your cut-off test: A. Goods valued at P110,000 are on consignment with a customer. These goods werenot included in the ending inventory figure. B.Goods costing P87,000 were received from a vendor on January 5, 2022. The relatedinvoice was received and recorded on January 12, 2022. The goods were shippedonDecember 31, 2021, terms FOB shipping point. C. Goods costing P85,000, sold for P102,000, were shipped on December 31, 2021, andwere delivered to the customer on January 2, 2022. The terms of the invoice wereFOBshipping point. The goods were included in the ending inventory for 2021 and thesalewas recorded in 2022. D. A P35,000 shipment of goods to a customer on December 31, terms FOB destinationwas not included in the year-end inventory. The goods cost P26,000…arrow_forward
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