Chapter 5 Accounting

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Chapter 5 Accounting
Merchandise: Products that a company acquires to resell to customers.
Merchandisers earn net income by buying and selling merchandise.
-Wholesalers or retailers
Wholesaler: An intermediary that buys products from manufacturers and sells them to retailers or wholesalers.
Retailer: An intermediary that buys products from manufacturers or wholesalers and sells them to consumers.
Cost of goods sold: The expense of buying and preparing merchandise.
Gross profit: Net sales of a product – Cost of goods sold
Net income for merchandiser: Net sales – cost of goods sold – other expenses
Merchandiser Income Statement:
-Net sales
-Cost of goods sold
-Gross profit
-Net income
Merchandise Inventory: An asset reported on the balance sheet and contains the cost of products purchased for sale. Products that a company owns and intends to sell.
Beginning inventory + Net purchases = Merchandise available for sale
Ending inventory + Cost of goods sold = Merchandise available for sale
Discount period: Time between the invoice date and a specified date on which the payment owed can be reduced because of early payment.
Cash discount: A discount given to buyers to encourage them to pay earlier.
Sales return: Merchandise that customers return to the seller after a sale.
Purchase return: Merchandise a buyer purchased, but then returns to the seller for a refund of the purchase price or reduction in the amount owed.
Dogs R US uses the perpetual inventory system to account for its merchandise. On May 1, it returned $50 of merchandise due to a defect. Assuming that the purchase was originally bought on credit, demonstrate the required journal entry.
-Account Payable DR: 50
-Merchandise inventory CR: 50
On June 5, X-mart purchased $400 of merchandise with terms of 2/10, n/30. If payment is made on June 11, calculate the purchase discount that may be taken by X-mart.
FOB destination: The seller is responsible for the shipping costs of merchandise sold.
Sales Discounts:

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