(a) Sales discounts: The term 3 / 10 , n / 30 means that if a customer is paying in 10 days then the payment will be after a discount of 3 % on the total value but if the customer is paying in 30 days then the payment will be made in full which means no discount. To calculate: The amount of cash to be collected from sales.

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Answer 1

Question

Chapter 5, Problem 81BPSB

To determine

(a)

Sales discounts:

The term 3/10,n/30 means that if a customer is paying in 10 days then the payment will be after a discount of 3% on the total value but if the customer is paying in 30 days then the payment will be made in full which means no discount.

To calculate:

The amount of cash to be collected from sales.

To determine

(b)

Sales discounts:

The term 2/15,n/45 means that if a customer is paying in 15 days then the payment will be after a discount of 2% on the total value but if the customer is paying in 45 days then the payment will be made in full which means no discount.

To calculate:

The sales revenue to be recognized on the income statement.

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Recently, Abercrombie & Fitch has been implementing a turnaround strategy since its sales had been falling for the past few years (11% decrease in 2014, 8% in 2015, and just 3% in 2016.) One part of Abercrombie's new strategy has been to abandon its logo-adorned merchandise, replacing it with a subtler look. Abercrombie wrote down $20.6 million of inventory, including logo-adorned merchandise, during the year ending January 30, 2016. Some of this inventory dated back to late 2013. The write-down was net of the amount it would be able to recover selling the inventory at a discount. The write-down is significant; Abercrombie's reported net income after this write-down was $35.6 million. Interestingly, Abercrombie excluded the inventory write-down from its non-GAAP income measures presented to investors; GAAP earnings were also included in the same report. Question: What impact would the write-down of inventory have had on Abercrombie's expenses, Gross margin, and Net income?

Recently, Abercrombie & Fitch has been implementing a turnaround strategy since its sales had been falling for the past few years (11% decrease in 2014, 8% in 2015, and just 3% in 2016.) One part of Abercrombie's new strategy has been to abandon its logo-adorned merchandise, replacing it with a subtler look. Abercrombie wrote down $20.6 million of inventory, including logo-adorned merchandise, during the year ending January 30, 2016. Some of this inventory dated back to late 2013. The write-down was net of the amount it would be able to recover selling the inventory at a discount. The write-down is significant; Abercrombie's reported net income after this write-down was $35.6 million. Interestingly, Abercrombie excluded the inventory write-down from its non-GAAP income measures presented to investors; GAAP earnings were also included in the same report. Question: What impact would the write-down of inventory have had on Abercrombie's assets, Liabilities, and Equity?

Answer 2

Question

Chapter 5, Problem 81BPSB

To determine

(a)

Sales discounts:

The term 3/10,n/30 means that if a customer is paying in 10 days then the payment will be after a discount of 3% on the total value but if the customer is paying in 30 days then the payment will be made in full which means no discount.

To calculate:

The amount of cash to be collected from sales.

To determine

(b)

Sales discounts:

The term 2/15,n/45 means that if a customer is paying in 15 days then the payment will be after a discount of 2% on the total value but if the customer is paying in 45 days then the payment will be made in full which means no discount.

To calculate:

The sales revenue to be recognized on the income statement.

Expert Solution & Answer

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Answer 3

Question

Chapter 5, Problem 81BPSB

To determine

(a)

Sales discounts:

The term 3/10,n/30 means that if a customer is paying in 10 days then the payment will be after a discount of 3% on the total value but if the customer is paying in 30 days then the payment will be made in full which means no discount.

To calculate:

The amount of cash to be collected from sales.

To determine

(b)

Sales discounts:

The term 2/15,n/45 means that if a customer is paying in 15 days then the payment will be after a discount of 2% on the total value but if the customer is paying in 45 days then the payment will be made in full which means no discount.

To calculate:

The sales revenue to be recognized on the income statement.

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Answer 4

Question

Chapter 5, Problem 81BPSB

To determine

(a)

Sales discounts:

The term 3/10,n/30 means that if a customer is paying in 10 days then the payment will be after a discount of 3% on the total value but if the customer is paying in 30 days then the payment will be made in full which means no discount.

To calculate:

The amount of cash to be collected from sales.

To determine

(b)

Sales discounts:

The term 2/15,n/45 means that if a customer is paying in 15 days then the payment will be after a discount of 2% on the total value but if the customer is paying in 45 days then the payment will be made in full which means no discount.

To calculate:

The sales revenue to be recognized on the income statement.

Expert Solution & Answer

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Answer 5

Chapter 5, Problem 81BPSB

To determine

(a)

Sales discounts:

The term 3/10,n/30 means that if a customer is paying in 10 days then the payment will be after a discount of 3% on the total value but if the customer is paying in 30 days then the payment will be made in full which means no discount.

To calculate:

The amount of cash to be collected from sales.

To determine

(b)

Sales discounts:

The term 2/15,n/45 means that if a customer is paying in 15 days then the payment will be after a discount of 2% on the total value but if the customer is paying in 45 days then the payment will be made in full which means no discount.

To calculate:

The sales revenue to be recognized on the income statement.

Answer 6

Chapter 5, Problem 81BPSB

To determine

(a)

Sales discounts:

The term 3/10,n/30 means that if a customer is paying in 10 days then the payment will be after a discount of 3% on the total value but if the customer is paying in 30 days then the payment will be made in full which means no discount.

To calculate:

The amount of cash to be collected from sales.

Answer 7

Chapter 5, Problem 81BPSB

To determine

(a)

Sales discounts:

The term 3/10,n/30 means that if a customer is paying in 10 days then the payment will be after a discount of 3% on the total value but if the customer is paying in 30 days then the payment will be made in full which means no discount.

To calculate:

The amount of cash to be collected from sales.

Answer 8

To determine

(b)

Sales discounts:

The term 2/15,n/45 means that if a customer is paying in 15 days then the payment will be after a discount of 2% on the total value but if the customer is paying in 45 days then the payment will be made in full which means no discount.

To calculate:

The sales revenue to be recognized on the income statement.

Answer 9

To determine

(b)

Sales discounts:

The term 2/15,n/45 means that if a customer is paying in 15 days then the payment will be after a discount of 2% on the total value but if the customer is paying in 45 days then the payment will be made in full which means no discount.

To calculate:

The sales revenue to be recognized on the income statement.

Answer 10

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Answer 11

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Answer 12

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Answer 13

Ch. 5 - When is revenue recognized?Ch. 5 - When is a performance obligation satisfied?Ch. 5 - At what amount should sales revenue be recorded...Ch. 5 - Prob. 4DQ Ch. 5 - Prob. 5DQ Ch. 5 - Prob. 6DQ Ch. 5 - Prob. 7DQ Ch. 5 - Prob. 8DQ Ch. 5 - Prob. 9DQ Ch. 5 - Why is the direct write-off method not GAAP?

Solution Summary: The author calculates the amount of cash to be collected from sales. The Smithson Products ells legal supplies offered the discount for the payment if it is received in 10 days.

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