Inventory Methods/Systems
What are the two systems used to track inventory?
Perpetual and Periodic
The direct writeoff method is a reactive approach to recording bad debts. True or False.
True
What does 2/10, net 30 mean?
2% discount if paid in 10 days, otherwise full amount due in 30 days.
When is your next exam?
Thursday
What are the two shipping terms covered?
FOB Shipping
FOB Destination
What are the four methods of tracking inventory?
SI, FIFO, LIFO, WAC
The allowance method is a proactive approach to recording bad debts. True or False.
True
Net Sales - COGS = ...
Gross Profit
What chapters are covered on the upcoming exam?
4, 5, & 7
Who has risk of loss throughout transit if a purchase has FOB destination shipping terms?
Seller
Which two methods yield the same results under the periodic and perpetual inventory cost system?
FIFO and SI
Name all three methods that can be used to estimate bad debt under the allowance method?
Percent of Sales
Percent of Receivables
Aging Schedule
What is the gross method of accounting for merchandise.
Ignore discounts and report the transaction at its full (gross) value. use adjusting journal entries to record discounts taken/received.
Part of the renovation will include a peacock enclosure and 7 live birds. One for every dean of the college of business. True or False
False
Damaged goods that can still be sold are included in inventory at their full value. True or False
False - net realizable value (discounted for damage)
If you operate in an industry where inventory prices are extremely volatile, what inventory method are you most likely to use and why?
Rando Corp uses the direct writeoff method. At the end of the current year Rando discovers it will not collect $15,000 of it receivables. What is the journal entry?
Dr Bad Debt Expense $15,000
Cr A/R $15,000
GNB sold some merchandise to a customer for $5,000. The product was damaged and the company ended up granting the customer a $1,000 allowance. What is GNB's journal entry to record the allowance?
Dr Sales Returns and Allowances $1,000
Cr A/R $1,000
How many kids do I have?
1 son and another son on the way!
Monkeyshine Brewing purchases inventory. The costs associated with that purchase are as follows: $1,000 inventory, $50 shipping (FOB Shipping), Sales tax $7; Gratuity $25. What is the cost of inventory?
$1,057
When purchase costs regularly rise, the inventory costing method that yields the highest reported net income is:
FIFO
Rando Corp uses the allowance method. At the end of the current year Rando discovers it will not collect $11,000 of it receivables and records the appropriate journal entry. A week later, Rando miraculously collects the $11,000. What is the journal entry?
Dr A/R $11,000
cr ADA $11,000
Dr Cash 11,000
cr A/R 11,000
A company purchased $1,800 of merchandise on July 5 with terms 2/10, n/30. On July 7, it returned $200 worth of merchandise. On July 10, it paid the full amount due. Assuming the company records purchases using the gross method, what is the correct journal entry on July 10th?
Dr A/P $1,600
Cr Inventory $32
Cr Cash 1,568
Where in the US did I grow up?
San Diego
If a buyer purchases inventory with FOB Shipping terms, are the purchased items included in the buyer's inventory while they are still in transit?
Yes.