Question Details

Were these merchandise shipments properly recorded as sales



1.	Amalgamated Campus Stores, Inc. (ACS) employed student representatives to market grooming aids, casual clothes, and other such products on college campuses. The representatives organized parties at which they displayed samples of all the products. Students who bought products paid the representative, who in turn ordered the products and paid ACS for them. When the products arrived, the student representatives delivered them to the buyers. The representatives paid ACS less than they charged the buyers. The difference represented the earnings of the representatives, who were not employees of ACS. Wall Street investors admired ACS because the company had enjoyed several years of rapid growth in sales and earnings.

Last year, the president of ACS predicted further increases in sales of 30 percent. By December, however, it was apparent that the forecasted sales goals would not be met. So during the last two weeks of December, ACS shipped $23 million of merchandise to the sales representatives to be held for future sales parties. The company billed the student representatives and recorded the shipments as sales. In this way, ACS was able to meet its sales goal for the year.

Were these merchandise shipments properly recorded as sales?
2.	Using the following transactions, calculate (A) the ending balance of Cash, (B) the ending balance of Accounts Receivable, (C) total liabilities, and (D) net income for the period. For parts a and b, indicate whether each balance is debit or credit. 

a. Opened business by investing $20,000 in cash.
b. Billed customers for services rendered, $4,000.
c. Paid for six months' subscription in advance, $1,000.
d. Received advertising bill, to be paid next week, $200.
e. Withdrawals of $1,600 were made by the owner.   
f. Received $3,000 from customers billed in b.
g. Paid half of advertising bill.
h. Received $400 in advance of performing a service.




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