Accounting Chapter 4

(From Z-mart perspective) Z-mart pays on accounts owed when buying inventory $200, 2% discount

Debit Accounts Payable $200, Credit Cash $196, Credit Merchandise Inventory $4

Gives $30 allowance from company for defective merchandise. Company's entry

Debit Accounts Payable $30, Credit Merchandise Inventory $30

Z-mart pays $500 they borrowed within 2/10 n/30

Debit Accounts Payable $500, Debit Merchandise Inventory $10, Credit Cash 490

From Smart's standpoint - Smart Company sold merchandise in the amount of $2,600 to Truman Company, with credit terms of 2/10, n/30. Smart uses the perpetual inventory system and the gross method. Truman pays the invoice on February 8

Debit Cash $2,548, Debit Sales Discounts $52, Credit Accounts Receivable $2600

From Z-mart's perspective, Z-mart sells goods that cost $300

Debit Cost of goods sold $300, Credit Merchandise Inventory $300

Z-mart finds out that the returned goods are defective, was $9 now $2

Debit Merchandise Inventory $2, Debit Loss from Defective merchandise $7, Credit cost of goods sold $9

Z-mart finds out that the returned goods not defective $9

Debit Merchandise Inventory $9, Credit Cost of goods sold $9

Z-mart receives Returns of defective merchandise $15

Debit Sales returns and allowances $15, Credit Cash $15

Z-mart's account showed $62,000 in the merchandise inventory, but a physical count showed only $61,000 of inventory exists

Debit costs of goods sold, Credit Merchandise Inventory

Freight charge is recorded as...

Debit merchandise Inventory, Credit Cash/whatever

Shrinkage

Debited as Cost of goods sold, Credited as Merchandise Inventory

Cushman Company had $820,000 in sales, sales discounts of $12,300, sales returns and allowances of $18,450, cost of goods sold of $389,500, and $282,080 in operating expenses. Gross profit equals:

From sales, subtract sales discounts, sales returns, cost of goods sold

FOB shipping point

From the shipping point the goods are owned by the buyer, he has to pay the shipping fee

Net sales

Gross sales - Sales returns - Sales Allowances - Discounts = Net sales

Multiple step income statement

Sales - sales discounts - sales returns and allowances

Closing entries

Sales, expenses, income summary

FOB Shipping point

buyer accepts ownership when the goods depart the seller's place of business. Buyer pays shipping cost and owns the goods in transit.

FOB Destination

ownership of goods transfers to the buyer when the goods arrive at the buyer's place of business. The seller is responsible for paying shipping charges and owns the goods in transit.

A buyer views a cash discount as a _____ discount. A seller views it as a ______ discount

purchases, sales