Discuss the following:
Companies like Wal-Mart, Target, and Amazon are all examples of companies that purchase inventory from suppliers, and then sell those products to consumers.
1). Describe the 2 formats for the income statement of a merchandising company, and list the respective sub-totals found in each income statement format. (You should describe some of the accounts found on each type of income statement).
2). a) Describe purchase discounts and purchase returns & allowances.
b) Describe the 2 shipping terms methods companies use when delivering products, and how freight costs are accounted for.
3). Sales on Account – Many sales are made on account (on credit) instead of with cash or a credit card. Assume that your new company purchases products for resell to customers, and your plan is to sell those products at a profit. Make the appropriate journal entries to record the sale (on account – ie., on credit) assuming your company sells 4 of those products to a single customer. (You should select any price you wish to pay to your vendor for the purchase). Hint – There will be 2 entries…Be sure to include both the sale to the customer, as well as the impact of the reduction of inventory through cost of goods sold.
