1. Alpha buys merchandise at a price of $ 10,000 and sends it to Beta for sale....
Question:
1. Alpha buys merchandise at a price of $ 10,000 and sends it to Beta for sale. Beta sells it for $ 18,000, withholds $ 1,800 as commission, and remits the remaining $ 16,200 to Alpha. As a result:
a. Beta recognizes sales income of $ 18,000 and cost of goods sold of $ 10,000.
b. Beta does not recognize sales revenue or cost of goods sold.
c. Alpha recognizes sales income of $ 16,200 and cost of goods sold of $ 10,000.
d. None of the above
2. A manufacturing company sells large quantities of merchandise on credit to various retail chains. Historically, customers (retailers) return an average of 20% of the merchandise purchased. When recording sales, the company must recognize in the statement of income and expenses
a. The total amount of gross sales, ignoring returns
b. The amount of net sales, after subtracting actual and estimated returns
c. The amount of net sales, subtracting only the actual returns.
d. The amount of the accounts collected.
