MULTIPLE CHOICES (10 points) 1. When the terms of sale are FOB shipping point, w

Question

MULTIPLE CHOICES (10 points) 1. When the terms of sale are FOB shipping point, who should ultimately pay the transportation charges?» Supplier Seller c. Shipping company Buyer 2. Which of the following methods uses the oldest price of inventory first when assigning a value to our inventory? a. FIFO LIFO Average cost 3. Merchandise inventory is classified on the balance sheet as a current asset current liability it's not on the balance sheet d. ng-term liability 4. A new account on the multi-step income statement for a merchandiser uses which of the following as an expense when selling inventory?. a. wages expense b. rchandise inventory. cost of goods sold copyright» 5. Taking advantage of a 2/10, n/30 purchases discount is equal to a yearly savings rate of approximately a. 24 2090 36%- 2%+'

Explanation / Answer

Answer 1 - buyer

Reason - free on board Shipping point is a term in international commercial law and according to the rules in this context When the terms of sale are FOB Shipping Point, the buyer incurs all transportation costs after the merchandise has been shipped. The buyer is responsible for paying freight charges.

Answer 2 - FIFO

Reason - first in first out basis (FIFO) basis if followed to record the inventory which uses the oldest price of inventory first when assigning the values. According to this method the inventory which came into the stock first will be sold first or we can say the inventory will be cleared according to first in - first out basis.

Answer 3 - current asset

Reason - Merchandise inventory is goods that have been purchased by a distributor, wholesaler, or retailer from suppliers, with an intention of reselling them to a third party. Marchendise inventory is a current asset for marchendise distributors, wholesalers, retailers just like any other inventory in a business.

Answer 4 - merchandise inventory

Reason - cost of goods sold is the new account in merchandising companies multistep income statement which represents what the seller paid for the inventory it has sold. It is derived by adding the opening inventory and purchase during the year and deducts the merchandise inventory to determine cost of goods sold. Thus merchandise inventory is used as and expense in this case.

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