Part A Falls Inc. (CFI) sells hats. CFI uses the perpetual method of accounting for inventory, and the gross method for recording sales discounts. CFI prepares monthly financial statements. Instead of the previous entry, assume this circumstance. CFI is preparing financial statements at 9/30. The inventory cost at September 30 is $1,200. Because the Red Sox are NOT in the World Series, determines that the Net Realizable Value of the hats is only $1,000. What is the effect on net income for this transaction? Note: if the event would NOT cause recognition of revenue or expense then select A: No effect on net income.

A. No effect on net income B. Decrease net income C. Increase net income

PART B

Falls Inc. (CFI) sells hats. CFI uses the perpetual method of accounting for inventory, and the gross method for recording sales discounts. CFI prepares monthly financial statements. On October 3, CFI receives a payment in full from a customer who purchased $1,000 of hats on September 8, 1/15, n/30. (Hint: Note that the customer paid AFTER the discount period!) What is the effect on net income for this transaction? Note: if the event would NOT cause recogntion of revenue or expense then select A: No effect on net income.

A. No effect on net income B. Decrease net income C. Increase net income

PART C

Falls Inc. (CFI) sells hats. CFI uses the perpetual method of accounting for inventory, and the gross method for recording sales discounts. CFI prepares monthly financial statements. On October 4, CFI pays $300 in shipping expenses on a crate of hats they previously purchased. What is the effect on net income for this transaction? Note: if the event would NOT cause recogntion of revenue or expense then select A: No effect on net income.

A. No effect on net income B. Decrease net income C. Increase net income

PART D

Cherry Falls Inc. (CFI) sells Red Sox baseball hats. CFI uses the perpetual method of accounting for inventory, and the gross method for recording sales discounts. CFI prepares monthly financial statements. On October 8, CFI decides that Horatio Hannos account is worthless, and writes it off. Hanno has owed CFI $1,500 for several years. What is the effect on net income for this transaction? Note: if the event would NOT cause recogntion of revenue or expense then select A: No effect on net income.

A. No effect on net income B. Decrease net income C. Increase net income