Trade discount: Seller of a product or service offers a reduction in the listed price of the product or service, such reduction is known as trade discount. Sales discount: Seller of a product or service offers a reduction in the ( accounts receivable ) amount to be paid by the customer, only if the customer makes payment within a specified period of time, such reduction is known as sales discount. To explain: The difference between the trade discount and sales discount.

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Answer 1

Question

Chapter 5, Problem 3RQ

To determine

Trade discount:

Seller of a product or service offers a reduction in the listed price of the product or service, such reduction is known as trade discount.

Sales discount:

Seller of a product or service offers a reduction in the (accounts receivable) amount to be paid by the customer, only if the customer makes payment within a specified period of time, such reduction is known as sales discount.

To explain: The difference between the trade discount and sales discount.

To determine

Sales discount:

Seller of a product or service offers a reduction in the (accounts receivable) amount to be paid by the customer, only if the customer makes payment within a specified period of time, such reduction is known as sales discount.

To describe: The location in which sales discounts are reported in 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 assets, Liabilities, and Equity?

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Answer 2

Question

Chapter 5, Problem 3RQ

To determine

Trade discount:

Seller of a product or service offers a reduction in the listed price of the product or service, such reduction is known as trade discount.

Sales discount:

Seller of a product or service offers a reduction in the (accounts receivable) amount to be paid by the customer, only if the customer makes payment within a specified period of time, such reduction is known as sales discount.

To explain: The difference between the trade discount and sales discount.

To determine

Sales discount:

Seller of a product or service offers a reduction in the (accounts receivable) amount to be paid by the customer, only if the customer makes payment within a specified period of time, such reduction is known as sales discount.

To describe: The location in which sales discounts are reported in the income statement.

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Answer 3

Question

Chapter 5, Problem 3RQ

To determine

Trade discount:

Seller of a product or service offers a reduction in the listed price of the product or service, such reduction is known as trade discount.

Sales discount:

Seller of a product or service offers a reduction in the (accounts receivable) amount to be paid by the customer, only if the customer makes payment within a specified period of time, such reduction is known as sales discount.

To explain: The difference between the trade discount and sales discount.

To determine

Sales discount:

Seller of a product or service offers a reduction in the (accounts receivable) amount to be paid by the customer, only if the customer makes payment within a specified period of time, such reduction is known as sales discount.

To describe: The location in which sales discounts are reported in the income statement.

Expert Solution & Answer

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Answer 4

Question

Chapter 5, Problem 3RQ

To determine

Trade discount:

Seller of a product or service offers a reduction in the listed price of the product or service, such reduction is known as trade discount.

Sales discount:

Seller of a product or service offers a reduction in the (accounts receivable) amount to be paid by the customer, only if the customer makes payment within a specified period of time, such reduction is known as sales discount.

To explain: The difference between the trade discount and sales discount.

To determine

Sales discount:

Seller of a product or service offers a reduction in the (accounts receivable) amount to be paid by the customer, only if the customer makes payment within a specified period of time, such reduction is known as sales discount.

To describe: The location in which sales discounts are reported in the income statement.

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Answer 5

Chapter 5, Problem 3RQ

To determine

Trade discount:

Seller of a product or service offers a reduction in the listed price of the product or service, such reduction is known as trade discount.

Sales discount:

Seller of a product or service offers a reduction in the (accounts receivable) amount to be paid by the customer, only if the customer makes payment within a specified period of time, such reduction is known as sales discount.

To explain: The difference between the trade discount and sales discount.

To determine

Sales discount:

Seller of a product or service offers a reduction in the (accounts receivable) amount to be paid by the customer, only if the customer makes payment within a specified period of time, such reduction is known as sales discount.

To describe: The location in which sales discounts are reported in the income statement.

Answer 6

Chapter 5, Problem 3RQ

To determine

Trade discount:

Seller of a product or service offers a reduction in the listed price of the product or service, such reduction is known as trade discount.

Sales discount:

Seller of a product or service offers a reduction in the (accounts receivable) amount to be paid by the customer, only if the customer makes payment within a specified period of time, such reduction is known as sales discount.

To explain: The difference between the trade discount and sales discount.

Answer 7

Chapter 5, Problem 3RQ

To determine

Trade discount:

Seller of a product or service offers a reduction in the listed price of the product or service, such reduction is known as trade discount.

Sales discount:

Seller of a product or service offers a reduction in the (accounts receivable) amount to be paid by the customer, only if the customer makes payment within a specified period of time, such reduction is known as sales discount.

To explain: The difference between the trade discount and sales discount.

Answer 8

To determine

Sales discount:

Seller of a product or service offers a reduction in the (accounts receivable) amount to be paid by the customer, only if the customer makes payment within a specified period of time, such reduction is known as sales discount.

To describe: The location in which sales discounts are reported in the income statement.

Answer 9

To determine

Sales discount:

Seller of a product or service offers a reduction in the (accounts receivable) amount to be paid by the customer, only if the customer makes payment within a specified period of time, such reduction is known as sales discount.

To describe: The location in which sales discounts are reported in 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 recording a credit sale, what account do we...Ch. 5 - Prob. 2RQ Ch. 5 - Prob. 3RQ Ch. 5 - Briefly explain the accounting treatment for sales...Ch. 5 - Prob. 5RQ Ch. 5 - Prob. 6RQ Ch. 5 - 7.What two purposes do firms achieve by estimating...Ch. 5 - Prob. 8RQ Ch. 5 - 9.What are the financial statement effects of...Ch. 5 - Prob. 10RQ

Solution Summary: The author explains the difference between trade discount and sales discount. Trade discount is to change the existing list price without publishing a new price list or disguise actual price among the competitors.

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Chapter 5 Solutions