1. The effect of a sales return and allowance is a reduction in sales revenue and a decrease in cash or accoun

Question

1. The effect of a sales return and allowance is a reduction in sales revenue and a decrease in cash or accounts receivable.
True or False

2. The following lots of a particular commodity were available for sale during the year:
Beginning inventory 10 units at $61
First purchase 25 units at $63
Second purchase 30 units at $64
Third purchase 15 units at $73
The firm uses the periodic system and there are 20 units of the commodity on hand at the end of the year. What is the amount of the inventory at the end of the year according to the average cost method?
a.$1,236
b.$1,415
c.$1,305
d.$1,300

3. If the buyer is to pay the transportation costs of delivering merchandise, delivery terms are stated as
a.FOB buyer
b.FOB destination
c.FOB n/30
d.FOB shipping point

4. Who pays the freight costs when the terms are FOB shipping point?
a.either the seller or the buyer
b.the buyer
c.the ultimate customer
d.the seller

Answer 1

1. The effect of a sales return and allowance is a reduction in sales revenue and a decrease in cash or accounts receivable.
True

2. The following lots of a particular commodity were available for sale during the year:
Beginning inventory10 units at $61
First purchase25 units at $63
Second purchase30 units at $64
Third purchase15 units at $73
The firm uses the periodic system and there are 20 units of the commodity on hand at the end of the year. What is the amount of the inventory at the end of the year according to the average cost method?
d.$1,300

Total units : 80 Total cost $5,200
So each unit cost $65 on average. If there were 20 on hand, 20 x $65 = $1,300.

3. If the buyer is to pay the transportation costs of delivering merchandise, delivery terms are stated as
d.FOB shipping point

4. Who pays the freight costs when the terms are FOB shipping point?
b.the buyer