Homework: Ch. 5 HW Score: 0 of 1 pt S5-4 (similar to) Save 1 of 8 (1 complete) H

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Homework: Ch. 5 HW Score: 0 of 1 pt S5-4 (similar to) Save 1 of 8 (1 complete) Hw Score: 3.33%, 0.33 of 10 pts Question Help * On December 23, 2016, Stevenson Sports Manufacturing sells a truckload of sporting goods to the Sports R Us store in Cleveland, Ohio. The terms of the sale are FOB destination. The truck runs into bad weather on the way to Cleveland and doesn't arrive untl January 2, 2017. Stevenson Sports Manufacturing's invoice totals $230,000 including sales tax. The company's yoar end is Dacember 31. What should Stevenson Sports manufacturing reflect in its 2016 income statement for this sale? Stevenson should report $ sales revenue for this sale on the income statement in 2016. Since the goods were sold FOB destination, revenue Homework: Ch. 5 HW Score: 0 of 1 pt S5-5 (similar to) Save 4 2 of (1 compiete) HW Score: 3.33%, 0.33 of 10 pts Question Help Company purchases inventory from Clear Pool Supplies on June 1. The sales terms on the invoice from Clear Pool Supplies are 4/20, net 30. What does this mean? What is Flower's company have to take advantage of these savings? potential savings, If any? How much time does the 4/20, nv30 means that Flower Company will get a discount will be of the original invoice price. Flower will need to pay the invoice within of the invoice date; otherwise, the full amount is due days of the original invoice date in order to take advantage of these The potential savings resulting from taking advantage of the savings S5-7 (similar to Company's facility on shipping point Leaven Company's cost of salen for this merchandise was $24,000. The merchandise left Leaven On April 3, Leaven Company sold $30,000 of merchandise to Ranger Corporation, terms 5/10, n/30. FOB April 4 and arrived at Ranger Corporation on April 10. Ranger Corporation paid the invoice for Read the requirements the merchandise on April 11 Ranger Corporation takes the discount # payment is Requirement 1. Prepare within the discount period. (You do not need to record any estimated returns/refunds for this the jounal entries for Leaven Company for the sale of the merchandise, the cost of the sale, and the related receipt of payment from Ranger Corporation Assume that exercise, )/Record debits first, then credits Exolude explanations from any journal entries) Prepare the journal entry for the sale of the merchandise. (Do not record the cost of the sale, we will do thatin the next s) Journal Entry Debit Credit Accounts Date April 4

Explanation / Answer

Stevenson should report $0 sales revenue for this sale on the income statement in 2016. Since the goods were sold FOB destination, revenue is recognized only when the goods reach the destination.

Since, the goods reached the destination on January 2, 2017, the revenue on the goods sold as on December31, 2016 is zero. Since the terms are FOB destination, these goods are considered part of inventory until they reach the destination.

As per the FOB destination terms, the goods are owned by the seller until the goods are delivered at the buyer’s destination.

4/20, n/30 means the Flower Company will get a 4% cash discount when paid within 20 days of the invoice date, otherwise the full amount is due in one month. The potential savings resulting from taking advantage of the discount will be 4% of the original invoice price. Flower will need to pay the invoice within 20 days of the original invoice date in order to take advantage of these savings.

Journal entries:

Journal Entries -

Date

Account Titles and Explanation

Debit

Credit

4-Apr

Accounts Receivable

$30,000

Sales Revenue

$30,000

(To record sale of the merchandise)

Cost of goods sold

$24,000

Merchandise Inventory

$24,000

(To record cost of goods sold)

11-Apr

Cash

$28,500

Discount

$1,500

Accounts Receivable

$30,000

(To record receipt of cash within the discount period)

Journal Entries -

Date

Account Titles and Explanation

Debit

Credit

4-Apr

Accounts Receivable

$30,000

Sales Revenue

$30,000

(To record sale of the merchandise)

Cost of goods sold

$24,000

Merchandise Inventory

$24,000

(To record cost of goods sold)

11-Apr

Cash

$28,500

Discount

$1,500

Accounts Receivable

$30,000

(To record receipt of cash within the discount period)

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