Recognize Special Inventory Sales Transactions - Accounting

The video tutorial covers the sales side of transactions, focusing on transportation costs, sales returns, allowances, and discounts. It explains the concept of FoB destination, where the seller assumes the risk and cost of transportation until delivery. The tutorial also discusses how to handle sales returns and allowances, emphasizing the use of specific accounts to reflect these transactions accurately. Finally, it addresses sales discounts, detailing how they affect revenue and accounts receivable.

What does FoB destination imply in terms of risk and cost responsibility?

• The buyer assumes all risks and costs.

• The seller assumes risk until the goods reach the destination.

• The buyer pays for transportation costs.

• The risk is shared equally between buyer and seller.

How are transportation costs recorded when the seller is responsible under FoB destination?

• As a purchase return.

• As part of inventory costs.

• As a delivery expense.

• As a sales discount.

What is the purpose of using a separate account for sales returns?

• To hide the returns from investors.

• To clearly show the amount of sales returned.

• To increase sales revenue.

• To reduce inventory costs.

How does a sales allowance differ from a sales return?

• The cost of goods sold is increased.

• The inventory is not returned, but revenue is reduced.

• The seller receives additional payment.

• The inventory is returned to the seller.

What happens to inventory and COGS when a sales allowance is given?

• Both are increased.

• Both are decreased.

• Only inventory is affected.

• Neither is affected.

How is a sales discount recorded in financial statements?

• As a delivery expense.

• As an increase in accounts receivable.

• As a separate discount account.

• As part of sales revenue.

What does the '2' in a 2/10, n/30 sales discount term represent?

• The number of days to pay the full amount.

• The number of days to return the goods.

• The total amount due.

• The percentage discount offered.