Chapter 5: Q5-11RQ (page 294)
Describe FOB shipping point and FOB destination. When does the buyer take ownership of the goods, and who typically pays the freight?
FOB shipping point indicates therisk linked with the buyer, and FOB destination represents the risk associated with the seller of the goods.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
What are the two types of inventory accounting systems? Briefly describe each.
What is inventory shrinkage? Describe the adjusting entry that would be recorded to account for inventory shrinkage.
Question: Journalize the following transactions that occurred in January 2018 for Mike’s Amusements. Assume Mike’s uses the gross method to record sales revenue. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name.
Jan. 4 Purchased merchandise inventory on account from Vanderbilt Company, \(5,000. Terms 1/10, n/EOM, FOB shipping point.
6 Paid freight bill of \)150 on January 4 purchase.
8 Returned half the inventory purchased on January 4 from Vanderbilt Company.
10 Sold merchandise inventory for cash, \(1,100. Cost of goods, \)440. FOB destination.
11 Sold merchandise inventory to Gilmore Corporation, \(10,100, on account, terms of 3/10, n/EOM. Cost of goods, \)5,555. FOB shipping point.
12 Paid freight bill of \(30 on January 10 sale.
13 Sold merchandise inventory to Cadet Company, \)8,800, on account, terms of 3/10, n/45. Cost of goods, \(4,400. FOB shipping point.
14 Paid the amount owed on account from January 4, less return and discount.
18 Purchased inventory of \)4,600 on account from Roberts Corporation. Payment terms were 1/10, n/30, FOB destination.
20 Received cash from Gilmore Corporation, less discount.
26 Paid amount owed on account from January 18, less discount.
28 Received cash from Cadet Company.
29 Purchased inventory from Silk Corporation for cash, \(12,000, FOB shipping point. Freight in paid to shipping company, \)240.
What would the credit terms of “2/10, n/EOM” mean?
Journalize the following transactions that occurred in September 2018 for Cardinal. Assume Cardinal uses the gross method to record sales revenue. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name.
Sep. 3 Purchased merchandise inventory on account from Sherry Wholesalers, \(4,000. Terms 1/15, n/EOM, FOB shipping point.
4 Paid freight bill of \)75 on September 3 purchase.
4 Purchased merchandise inventory for cash of \(1,900.
6 Returned \)1,100 of inventory from September 3 purchase.
8 Sold merchandise inventory to Houston Company, \(5,500, on account. Terms 3/15, n/35. Cost of goods, \)2,365.
9 Purchased merchandise inventory on account from Tarin Wholesalers, \(12,000. Terms 3/10, n/30, FOB destination.
10 Made payment to Sherry Wholesalers for goods purchased on September 3, less return and discount.
13 After negotiations, received a \)200 allowance from Tarin Wholesalers.
15 Sold merchandise inventory to Java Company, \(3,300, on account. Terms 2/10, n/EOM. Cost of goods, \)1,320.
22 Made payment, less allowance, to Tarin Wholesalers for goods purchased on September 9.
25 Sold merchandise inventory to Smecker for \(1,900 on account that cost \)722. Terms of 1/10, n/30 were offered, FOB shipping point. As a courtesy to Smecker, $85 of freight was added to the invoice for which cash was paid by Cardinal.
28 Received payment from Houston Company.
29 Received payment from Smecker, less discount.
30 Received payment from Java Company.
What do you think about this solution?
We value your feedback to improve our textbook solutions.
