Fundamental Financial Accounting Concepts
Quiz 4: Accounting for Merchandising Businesses
In a Perpetual Inventory System,a Purchase Allowance Is Treated as a Decrease
In a perpetual inventory system,a purchase allowance is treated as a decrease in expenses by the company that purchased the goods.
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A company that purchases merchandise treats a cash discount as a reduction to the cost of merchandise inventory.
Melbourne Company sold merchandise that it had purchased with a list price of $3,300 and subject to terms of 2/10,n/30.Assuming that Melbourne paid for the merchandise during the discount period,the cost of goods sold for this transaction would be $2,970.
The income statement is not affected by a purchase of merchandise.
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