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2. Learning Objectives
3. Merchandising Activities
Revenues Expenses Minus Net income Equals 4. Merchandising Activities Manufacturer Wholesaler Retailer Customer Merchandising Companies 5. Reporting Income for a Merchandiser
Cost of Goods Sold Gross Profit Expenses Net Income Net Sales Minus Equals Minus Equals 6. Operating Cycle for a Merchandiser
Purchases Merchandise inventory Credit sales Account receivable Cash collection Purchases Merchandise inventory Cash sales Cash Sale Credit Sale 7. Inventory Systems + + Beginning inventory Net cost of purchases Merchandise available for sale Ending Inventory Cost of Goods Sold = 8. Inventory Systems Perpetual Inventory System Periodic Inventory System Detailed records of the cost of each item are maintained, and the costof each item sold is determinedfrom records when thesale occurs . Cost of goods sold is determinedonly at theend of an accountingperiod . Applied in this chapter 9. Accounting for Merchandise Purchases On 20 June, Jason Inc. purchased $14,000 of Merchandise Inventory paying cash. 10. Seller Invoice date Purchaser Order number Credit terms Freight terms Goods Invoice amount 11. Trade Discounts
Example Matrix, Inc. offers a 30% trade discount on orders of 1,000 units or more of their popular product Racer.EachRacer has a list price of $5.25. 12. Purchase Discounts
Terms Time Due Discount Period Full amount less discount Credit Period Full amount due Purchase or Sale 13. Purchase Discounts 2/10,n/30 Discount Percent Number of Days Discount Is Available Otherwise, Net (or All) Is DueCredit Period 14. Purchase Discounts
15. Purchase Discounts
$27,000 2%=$540 discount 16. Purchase Discounts
Merchandise Inventory Accounts Payable 5/727,000 5/727,000 5/15540 5/1527,000 Bal. 26,460 Bal.0 17. Failure to Pay Within the Discount Period
365 days20 days2%= 36.5% annual rate Days in a year Number of additional days before payment Percent paid tokeepmoney 18. Purchase Returns and Allowances
19. Purchase Returns and Allowances
20. Purchase Returns and Allowances
21. Purchase Returns and Allowances
22. Transportation Costs FOB shipping point (buyer pays) FOB destination (seller pays) Merchandise Seller Buyer 23. Transportation Costs
24. Quick Check On 6 July 2005Seller Co. sold $7,500 of merchandise to Buyer Co.; terms of 2/10,n/30.The shipping terms were FOB shipping point.The shipping cost was $100. Which of the following will be part of Buyers 6July journal entry?a. Credit Sales $7,500 b. Credit Purchase Discounts $150 c. Debit Merchandise Inventory $100 d. Debit Accounts Payable $7,450 FOB shipping point indicates the buyer ultimately pays the freight.This is recorded with a debit to Merchandise Inventory . 25. Itemized Cost of Merchandise Purchased 26. Accounting for Merchandise Sales Sales discounts and returns and allowances areContra Revenue accounts. 27. Sales of Merchandise
28. Sales Discounts
29. Sales Discounts
30. Sales Returns and Allowances
31. Sales Returns and Allowances
32. Sales Returns and Allowances
33. Lets complete the accounting cycle by preparing the closing entriesfor Barton. 34. Step 1 :Close Credit Balances in Temporary Accounts to Income Summary. 35. Step 2 :Close Debit Balances in Temporary Accounts to Income Summary. 36. Step 3 :Close Income Summary to Owners Capital 37. Step 4 :Close Withdrawals Account to Owners Capital. 38. Income Statement Formats
39. Multiple-Step Income Statement 40. Single-Step Income Statement 41. Classified Balance Sheet 42. End of Chapter 5