Accounting I Chapter 5 Homework Due Date: Monday 10/31/2011 at the beginning of class REFER TO THE SYLLABUS FOR GUIDANCE

ON AUTHORIZED/UNAUTHORIZED COLLABORATION. DO YOUR OWN WORK! Multiple Choice: 1.) If a buyer is offered a trade discount, when is the trade discount recognized: a. at the date of the sale b. at the date of payment 2.) When is a cash discount (whether a purchase discount or sales discount) recognized: a. at the date of the sale b. at the date of the payment 3.) What account does the buyer record the amount of a purchase discount to? a. Inventory b. Purchase discounts c. Sales discounts d. Sales returns and allowances 4.) What account does the buyer record the amount of a purchase return or a purchase allowance to? a. Inventory b. Purchase discounts c. Sales discounts d. Sales returns and allowances 5.) What account does the seller record the amount of a sales discount to? a. Inventory b. Purchase discounts c. Sales discounts d. Sales returns and allowances 6.) What account does the seller record the amount of a sales return or a sales allowance to? a. Inventory b. Purchase discounts c. Sales discounts d. Sales returns and allowances Short Answer: 7.) Briefly describe the difference between a return and an allowance. Return refers to merchandise a buyer acquires but then returns to the seller. Allowance is a reduction in the cost of a defective or unacceptable merchandise that a buyer acquires 8.) A.) Who is the owner of the goods during the transportation process if the goods are shipped FOB shipping point? Buyer B.) Who is responsible for paying for the shipping costs when goods are shipped FOB shipping point? Buyer

C.) Which account will the shipping costs be recorded in if the goods are shipped FOB shipping point? Debit inventory, credit cash or A/P 9.) A.) Who is the owner of the goods during the transportation process if the goods are shipped FOB destination? Seller B.) Who is responsible for paying for the shipping costs when goods are shipped FOB destination? Seller C.) Which account will the shipping costs be recorded in if the goods are shipped FOB destination? Debit delivery expense, credit cash Journal entries and related questions: 11/1/2010 11/2/2010 11/4/2010 11/10/2010 Widgets, Inc. sold 300 widgets to Gadgets Company for $14 each, credit terms 3/10, n/45, FOB shipping point. Widgets, Inc. had paid $12 for each of the widgets sold. Upon delivery, Gadgets Company paid $60 to FedEx for the shipping costs of the merchandise purchased from Widgets, Inc. on 11/1/2010. Gadgets Company returned 25 defective widgets to Widgets, Inc. These defective units cannot be resold by Widgets, Inc. Gadget Company paid the amount due to Widgets, Inc.

10.) For the transactions above, record all journal entries that Gadgets Company (buyer) would have to record for the transactions listed above. 11.) For the transactions above, record the journal entries that Widgets, Inc. (seller) would have to record for the transactions listed above. 12.) What value would be recorded in Gadgets Companys inventory account after the 11/10/2010 transaction? (assume this is the only merchandise that Gadgets has available for sale and that Gadgets has not resold any of the merchandise yet). You may use a t-account to illustrate the account. 13.) Calculate the net sales (related to the transactions above) for Widgets, Inc. after the 11/10/2010 transaction.