This week, we will be reviewing Chapter 5 on Merchandising Operations. 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.

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