Hi, I need Accounting help please Recording Sales and Shipping Terms Required: 1

Question

Hi, I need Accounting help please

Recording Sales and Shipping Terms

Required:

1. Compute the total amount of sales revenue recognized by Stanley in December 2013.
$

2. Conceptual Connection: If Stanley included all of the above shipments as revenue, what would be the effect on Stanley's assets, liabilities, stockholders' equity, revenues, expenses, and net income for 2013? Enter all amounts as positive numbers.

Sales revenue SelectOverstatedUnderstatedItem 2 by $ Net income SelectOverstatedUnderstatedItem 4 by $ Assets (accounts receivable) SelectOverstatedUnderstatedItem 6 by $ Stockholders' equity SelectOverstatedUnderstatedItem 8 by $

Explanation / Answer

ans 1 Total amount of sale revenue Date of Good Shipped Shipping terms Date Good Received Sale price Sales to be included 27-Dec FOB shipping point 3-Jan $5,460 $5,460 29-Dec FOB Destination 5-Jan 3800 29-Dec FOB Destination 31-Dec 4250 $4,250 Total Sales $9,710 FOB destination, ownership passes to the buyer when the goods arrive at the buyer's receiving dock; at this point, the seller has completed the sales transaction and revenue has been earned and is recorded. If the shipping terms are FOB shipping point, ownership passes to the buyer when the goods leave the seller's shipping dock, thus the sale of the goods is complete and the seller can recognize the earned revenue. Ans 2 If shipment is included than the revenue will increase Sales Revenue Overstated $3,800 Net Income Overstated $3,800 Accounts Receivable Overstated $3,800 Stockholder Equity Overstated $3,800 As shipping cost is freight cost it is never recorded in sales, it is shown as freifgt/transportation cost FOB destination means the cost of freight is borne by seller FOB shipping point means the cost of freight is borne by buyer Goods are sold F.O.B. at shipping point the freight prepaid, the seller prepays the trucking company as an accommodation to the purchaser. This prepaid freight increases the accounts receivable of the seller. FOB destination is the expense of freight directly paid by seller

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