How does each transaction effect on inventory inventory balance?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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How does each transaction effect on inventory inventory balance?
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The transactions listed below are typical of those involving Amalgamated Textiles and American Fashions. Amalgamated
is a wholesale merchandiser and American Fashions is a retail merchandiser. Assume all sales of merchandise from
Amalgamated to American Fashions are made with terms n/60, and the two companies use perpetual inventory systems.
Assume the following transactions between the two companies occurred in the order listed during the year ended
December 31.
a. Amalgamated sold merchandise to American Fashions at a selling price of $230,000. The merchandise had cost
Amalgamated $175,000.
b. Two days later, American Fashions returned goods that had been sold to the company at a price of $20,000 and
complained to Amalgamated that some of the remaining merchandise differed from what American Fashions had
ordered. Amalgamated agreed to give an allowance of $5,000 to American Fashions. The goods returned by American
Fashions had cost Amalgamated $15,270.
C. Just three days later, American Fashions paid Amalgamated, which settled all amounts owed.
sk
nt
ences
Required:
1. Indicate the amount and direction of the effect (+ for increase, – for decrease, and NE for no effect) of each transaction on the
Inventory balance of American Fashions. (Enter all amounts as positive values.)
Effect on
Transaction
Inventory Balance
a.
b.
C.
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Transcribed Image Text:ass #1 6
Saved
Не
Required information
(The following information applies to the questions displayed below.]
The transactions listed below are typical of those involving Amalgamated Textiles and American Fashions. Amalgamated
is a wholesale merchandiser and American Fashions is a retail merchandiser. Assume all sales of merchandise from
Amalgamated to American Fashions are made with terms n/60, and the two companies use perpetual inventory systems.
Assume the following transactions between the two companies occurred in the order listed during the year ended
December 31.
a. Amalgamated sold merchandise to American Fashions at a selling price of $230,000. The merchandise had cost
Amalgamated $175,000.
b. Two days later, American Fashions returned goods that had been sold to the company at a price of $20,000 and
complained to Amalgamated that some of the remaining merchandise differed from what American Fashions had
ordered. Amalgamated agreed to give an allowance of $5,000 to American Fashions. The goods returned by American
Fashions had cost Amalgamated $15,270.
C. Just three days later, American Fashions paid Amalgamated, which settled all amounts owed.
sk
nt
ences
Required:
1. Indicate the amount and direction of the effect (+ for increase, – for decrease, and NE for no effect) of each transaction on the
Inventory balance of American Fashions. (Enter all amounts as positive values.)
Effect on
Transaction
Inventory Balance
a.
b.
C.
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