Chapter 6 ACCT
FOB destination means the buyer owns the goods while it is being transported. It also means the buyer is liable if the goods are damaged during transit.
FALSE
FOB shipping point means the seller pays the shipping cost.
FALSE
Freight in refers to FOB shipping point
TRUE
The periodic system is likened to the Flinstones cartoon because it is manual and not updated until the end of the period.
TRUE
3/10 n 31 means a 10% discount if paid in 3 days or the full amount due in 31 days.
FALSE
4/15 n 21 means you get a 21% discount if paid with 15 days otherwise the full amount is due within 4 days.
FALSE
ABC sells items to ZYX under FOB destimation. ZYX would debit inventory and credit cash to record the freight charges.
FALSE
Barnes and nobles purchases a new book for each employee at the bookstore for personal use. These books are considered inventory for Barnes and Nobles.
FALSE
FOB destination means the buyer pays the shipping costs.
FALSE
FOB shipping point means the seller owns the goods while it is being transported. It also means the seller is liable if the goods are damaged during transit.
FALSE
On January 1st, ABC makes a sale to ZYX with terms FOB shipping point 2/10 net 30. ZYX pays ABC on January 15th. This means ZYX received the discount.
FALSE
Shrinkage occurs when the actual inventory in the store is greater than the inventory shown in the company's accounting records.
FALSE
Unless told otherwise, when we refer to inventory in this course, you should assume we are using the periodic system
FALSE
2/5 n 30 means you get a 2% discount if paid within 5 days otherwise the full amount is due within 30 days.
TRUE
In a sales return, the buyer returns the inventory to the seller. In a sales allowance, the buyer keeps the inventory and is given a discount by the seller.
TRUE
Inventory belongs on the balance sheet as a current asset
TRUE
The freight costs for FOB destination are treated as a delivery expense.
TRUE
The perpetual system is likened to the Jetsons cartoon because it is automated and updated in real time.
TRUE
When calculating the discount for early payment of goods purchased, you must make sure to reduce the inventory balance for any good returned or allowances received.
TRUE
When inventory is sold, it moves from the balance sheet to an expense (cost of goods sold) on the income statement.
TRUE
