Question 1

With terms of 2/10, n/30, the purchaser gets a _____ discount if they pay within ______ days; otherwise, the invoice price less any returns or allowances is due within _____ days.

Accepted Answer

The answer of With terms of 2/10, n/30, the purchaser...

Question 2

Holmes Corporation manufactures electronic components for use in many consumer products. Their raw materials are purchased from all over the world. Depending on the country involved, purchase terms vary widely. Some suppliers, for example, require full prepayment, while others are content to receive payment within six months of receipt of the goods.
Because of this situation, Holmes never closes its books until at least ten days after month end. In this way, it can sort out ownership of goods in transit, and document which goods were received by month end, and which were not.
Manya Andre, a new accountant, was asked to record about $70,000 in inventory as having been received before month end. She argued that the shipping documents clearly showed that the goods were actually received on the 8th of the current month. Her boss, busy with month-end reports, curtly tells Ann to check the shipping terms. She did so and found the notation "FOB shipper's dock" on the document. She hadn't seen that particular notation before, but she reasoned that if the selling company considered it shipped when it reached their dock, Holmes should consider it received when it reached Holmes's dock. She did not record the purchase until after month end.
Required:
1. Why are accountants concerned with the timing of the recording of purchases?
2. Was there a violation of ethical standards here? Explain.

Accepted Answer

The answer of Holmes Corporation manufactures electronic components for use...

Question 3

A purchase ________________ is a deduction made to the selling price with the buyer keeping the merchandise, while in a purchase _______________, the buyer does not keep the goods and gets a full cash or credit refund.

Accepted Answer

The answer of A purchase ________________ is a deduction made...

Question 4

Helen Hunt and Cora Coates, two salespersons in adjoining territories, regularly compete for bonuses. During the last month, their dollar volume of sales, on which the bonuses are based, was nearly equal. On the last day of the month, each made a large sale. Both orders were shipped on the last day of the month and both were received by the customer on the fifth of the following month. Helen's sale was FOB shipping point, and Cora's was FOB destination. The company "counts" sales for purposes of calculating bonuses on the date that ownership passes to the purchaser. Helen's sale was therefore counted in her monthly total of sales, Cora's was not. Cora is quite upset. She has asked you to just include it or to take Helen's off as well. She also has told you that you are being unethical for allowing Helen to get a bonus just for choosing a particular shipping method.
Write a memo to Cora. Explain your position.

Accepted Answer

The answer of Helen Hunt and Cora Coates, two salespersons...

Question 5

Distinguish between FOB shipping point and FOB destination. Identify the freight terms that will result in a debit to Inventory by the purchaser and a debit to Freight-out by the seller.

Accepted Answer

The answer of Distinguish between FOB shipping point and FOB...

Question 6

Net income is determined by subtracting total operating expenses from ________________.

Accepted Answer

The answer of Net income is determined by subtracting total...

Question 7

Bill Potts is a new employee of Zuzu's Pedals. Bill has never worked for a merchandising company. Compare and contrast for Bill purchase returns and purchase allowances.

Accepted Answer

The answer of Bill Potts is a new employee of...

Question 8

Clara Oswald has only worked for a service company and now will begin working at a merchandising company. Explain to Clara the differences in the accounts and financial statements for the two types of companies.

Accepted Answer

The answer of Clara Oswald has only worked for a...

Question 9

How should Get Outdoors! Compute the amount to pay on an invoice,

Accepted Answer

The answer of How should Get Outdoors! Compute the amount...

Question 10

FOB _______________________ indicates that the seller pays the freight.

Accepted Answer

The answer of FOB _______________________ indicates that the seller pays...

Question 11

Armando Martinez believes revenues from credit sales may be recognized before they are collected in cash. Do you agree? Explain.

Accepted Answer

The answer of Armando Martinez believes revenues from credit sales...

Question 12

The acquisition of inventory is debited to the ____________ account when a perpetual inventory system is used.

Accepted Answer

The answer of The acquisition of inventory is debited to...

Question 13

The freight cost incurred by a seller to deliver goods sold to a customer is called ________________.

Accepted Answer

The answer of The freight cost incurred by a seller...

Quiz 7: Merchandising Companies: Purchases Perpetual

With terms of 2/10, n/30, the purchaser gets a _ discount if they pay within days; otherwise, the invoice price less any returns or allowances is due within ___ days.

A purchase __ is a deduction made to the selling price with the buyer keeping the merchandise, while in a purchase _, the buyer does not keep the goods and gets a full cash or credit refund.