Web Co Operates a Website Selling Used Books $\bullet$ Web Co Will Transport the Books Sold to the End

question 7

Multiple Choice

Web Co operates a website selling used books. Web Co enters into a contract with Bookstore, a used bookshop, to sell books sold by Bookstore. The terms and conditions of the contract include:
$\bullet$ Web Co will transport the books sold to the end customer.
$\bullet$ Web Co does not take possession of the books sold to the customers; however, the customer returns the books to Web Co if they are dissatisfied.
$\bullet$ Web Co has the right to return books to Bookstore without penalty if they are returned by the customer.
$\bullet$ Web Co will invoice the customer for the sale.
$\bullet$ Web Co earns a fixed margin on the books sold, and has no flexibility in establishing the sales price of the book.
$\bullet$ Bookstore retains credit risk for sales to the customer.
Web Co should recognise revenue on the transfer of the books to the customer:

• A) on a gross basis
• B) on a net basis
• C) on a gross basis as Bookstore retains all credit risk
• D) on a net basis as Web Co does not set the sales price

Apply cost flow assumptions in determining cost of goods sold.

Understand how payment terms and purchase discounts affect journal entries under the gross method.

Recognize the effects of LIFO liquidation on pre-tax income.

Distinguish between perpetual and periodic inventory systems and their impact on financial records.

---

Definitions:

Exposure

The condition of being subject to something which may have an impact, such as disease or elements, or gaining experience in a certain field.

Lead

A chemical element with the symbol Pb that is used in various industries but is toxic to humans and animals when ingested or inhaled.

Radiation

The release of energy in the form of electromagnetic waves or moving particles at the subatomic level, particularly those high-energy particles which lead to ionization.

Pesticides

Substances used to kill pests, including insects, rodents, fungi, and weeds, often utilized in agriculture to protect crops.