ACCC 203- Chapter 4
ACCC 203- Chapter 4 ACC 203
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This 3 page Class Notes was uploaded by Emely Curvelo on Tuesday October 20, 2015. The Class Notes belongs to ACC 203 at Pace University taught by John Paul in Summer 2015. Since its upload, it has received 22 views. For similar materials see Financial Accounting in Accounting at Pace University.
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Date Created: 10/20/15
Accounting 203 Notes Chapter 4 Merchandising activities Service organizations sell time to earn revenue Examples Accounting firms law firms and plumbing services Revenues Expenses Net Income Merchandising Companies Sell products to earn revenue Manufacturerl WholesalerElRetailerl Customer Examples Sporting goods clothing and auto parts stores Net Sales Cost of Goods Sold Gross Profit Expenses Net Income Reporting Income of a Merchandiser Merchandising Company Income Statement W Net sales 150000 Cost of goods sold 8Q000 Gross profit 70000 Operating expenses Am Net income amp Operating Cvcle for a Merchandiser Begins with the purchase of merchandise and ends with the collection of cash from the sale merchandise 7 WT Inventorv Svstem Be innin Invgentoryg I Ending Inventory t f Net Cost COS golgOOds nPIIrrhases f Merchandise Available for Sale Trade Discounts Used by manufacturers and Wholesalers to offer better prices for greater quantities purchased Example Matrix Inc offers a 30 trade discount on orders of 1000 units or more of their popular product Racer Each Racer has a list price of 525 Quantity sold 1000 Price per unit 525 Total 5250 Less 30 discount 1 575 Invoice price 3675 Purchase Discounts Deduction from the invoice price granted to induce early payment of the amount due Purchase Returns and Allowances 0 Returns Merchandise returned by the purchaser to the supplier 0 Allowances Reduction in the cost of defective merchandise received by a purchaser from a supplier Transportation Cost FOB Shipping FBO destination pOIFEtangsliyer MerChand39Se Seller pays Ownership transfers to buyer when goods Transportation Terms are passed to costs paid by FOB shipping point Carrier Buyer FOB destination Buyer Seller Steps to complete the accounting cycle by preparing the closing entries for Barton Close credit balances in temporary accounts to income summary Close debit balances in temporary accounts to income summary Close income summary to owner s capital Close Withdrawals to owner s capital sewer Income Statement Formats Barton Company Income Statement ForYear no I no H Sales 323800 Less Salesdiscounts 4300 ncome Statement Sales returns 2090 I I Net sales A I A 39 A A A 39 Cost of Goods Sold I I Gross profit from sales 84300 Net sales 317500 Selling expenses Salariesexpense 29500 Cost of goods sold 233 200 Advertising expense 13300 42900 General and administrative expenses 39 Adm salaries expense 18200 Insurance expense 1200 A Rent expense 8100 39 Supplies expense L000 2 509 39 Total operating expenses H Income 39 39 Net income a u Acid Test Ratio Common Rule of Thumb Acid test ratio should have a value of at least 10 to conclude a company is unlikely to face liquidity problems in the near future Acidtest Ratio Quick Assets Current Liabilities J AcidTest Ratio Cash ST Investments Receivabe Current Liabilities Gross Margin Ratio Percentage of dollar sales available to cover eXpenses and provide a profit Gross Margin Ratio Net Sales Cost of Goods Sold Net Sales