Exam 4: Inventories

Communication: Jacqui Marx and Melissa Clark, two salespersons in adjoining territories, regularly compete for bonuses. During the last month, their dollar volume of sales, on which the bonuses are based, was nearly equal. On the last day of the month, both made a large sale. Both orders were shipped on the last day of the month and both were received by the customer on the fifth day of the following month. Jacqui's sale was FOB shipping point (ownership passes to buyer at time of shipping), and Melissa's was FOB destination (ownership passes to buyer at time of receipt). The company 'counts' sales for purposes of calculating bonuses on the date that ownership passes to the purchaser. Jacqui's sale was therefore counted in her monthly total of sales, Melissa's was not. Melissa is quite upset. She has asked you to just include it, or to take Jacqui's off as well. She also has told you that you are being unethical for allowing Jacqui to get a bonus just for choosing a particular shipping method. Write a memo to Melissa. Explain your position.

-The amount of gross profit on the income statement would be:

Match the items below by choosing the appropriate code letter . -These specify the amount of cash discount and the time period during which it is offered.

Billy's Boots purchased inventory with an invoice price of $5,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Billy's Boots pays within the discount period?

Match the items below by choosing the appropriate code letter . -Net sales less cost of sales.

The goods and services tax is commonly described as a broad-based tax. Explain the meaning of the term 'broad-based' tax.

Metal Music Ltd is a retail store specialising in musical instruments and consumables for rock and metal musicians. At the beginning of February 2019, the ledger of Metal Music Ltd showed Cash $2,500; Inventory $1,700; and Share capital $4,200. The following transactions were completed during February: Required: (a) Journalise the February transactions (ignore GST). (b) Using T accounts, enter the beginning balances in the ledger accounts and post the April transactions. (c) Prepare a trial balance on 28 February 2019. (d) Prepare an income statement up to gross profit.

Match the items below by choosing the appropriate code letter . -Provides evidence of a credit sale.

Complete the following statements: -The amount of goods and services tax collected by a business is recorded in a(n) _____________ account.

The operating expenses to sales ratio is computed by dividing:

Under the perpetual inventory system what is the correct entry for the credit purchase of 5 washing machines at $300 per washing machine plus GST of $30 each?

Complete the following statements: -A useful measure for evaluating operating expenses is the ratio of operating expenses to _____________.

Ethics: Glasco Ltd manufactures electronic components for use in many consumer products. Their raw materials are purchased literally from all over the world. Depending on the country involved, purchase terms vary widely. Some suppliers, for example, require full prepayment, while others are content to receive payment within six months of receipt of the goods. Because of this situation, Glasco never closes its books until at least ten days after month end. In this way, it can sort out ownership of goods in transit, and document which goods were received by month end, and which were not. Annie Reilly, a new accountant, was asked to record about $50,000 in inventory as having been received before month end. She argued that the shipping documents clearly showed that the goods were actually received on the 8th of the current month. Her boss, busy with month end reports, curtly tells Annie to check the shipping terms. She did so, and found the notation 'FOB (free on board) shipper's dock' on the document. She hadn't seen that particular notation before, but she reasoned that if the selling company considered it shipped when it reached their dock, Glasco should consider it received when it reached Glasco's dock. She did not record the sale until after month end. Required: (a) Why are accountants concerned with the timing in the recording of purchases? (b) Was there a violation of ethical standards here? Explain.

Match the items below by choosing the appropriate code letter . -A cash discount claimed by a buyer for prompt payment of a balance due.

Sales revenue less cost of sales is called: