Question

Aug. 1 summit company sold merchandise on account to beartooth co., $49,550, terms fob destination, n/15. the cost of the goods sold was $30,000.

Answer 1

The question pertains to a sales transaction where Summit Company sells merchandise on account to Beartooth Co. for $49,550 with FOB destination and n/15 terms, and with a cost of goods sold amounting to $30,000. The terms define responsibility for shipping costs and ownership transfer of the merchandise, as well as the payment period.

Step-by-step explanation:

The transaction described involves a company (Summit Company) selling merchandise on account to another company (Beartooth Co.). This sale was for a total of $49,550 and the terms included 'FOB destination, n/15.' The acronym FOB stands for 'Free on Board,' which is a term used in shipping that outlines who is responsible for shipping costs and at what point the responsibility for the goods transfers from the seller to the buyer. In this case, 'FOB destination' means that Summit Company, the seller, is responsible for the goods and the shipping costs until they reach Beartooth Co., the buyer. The 'n/15' means that the invoice is due in net 15 days. The cost of the goods mentioned was $30,000, which implies that this is the cost to Summit Company for the merchandise they sold to Beartooth Co. for $49,550. Understanding these terms is essential in business transactions as they directly impact the payment conditions and the logistic responsibilities of each party.

The difference between the selling price and the cost of goods sold, known as the gross profit, would be $19,550 for Summit Company. This form of transaction is quite typical in business-to-business (B2B) sales where goods are sold on credit with specific payment terms. Such details are crucial for accounting and financial reporting purposes, as they affect a company's revenue recognition and its inventory and shipping costs.

Answer 2

The question pertains to a business transaction with merchandise being sold on account, including terms like 'FOB destination' and 'n/15'.

Step-by-step explanation:

The scenario described presents a business transaction involving the sale of merchandise on account by Summit Company to Beartooth Co. The terms 'FOB destination' indicate that the shipping costs are the responsibility of the seller until the goods reach the buyer's destination. A term like 'n/15' specifies that the net amount is due within 15 days.

The cost of goods sold (COGS) is the direct costs attributable to the goods sold by a company. In this case, the COGS is $30,000, which reflects the company's expenditure on the goods sold to Beartooth Co. On the other hand, the sales price of $49,550 is the amount Beartooth Co. is expected to pay for the merchandise.

The difference between these two amounts represents the gross profit on the sale for Summit Company. The importance of understanding such terms is paramount for properly managing the financials of a business and reflecting accurate financial statements.