Deck 10: Purchases and Cash Payments

Question 1

When merchandise is bought for resale, which of the following accounts would be increased?

A)Store Equipment
B)Purchases
C)A/R
D)Capital

Answer 1

B

Question 2

When the term F.O.B. shipping point is used, title passes:

A)when goods reach the halfway point.
B)when goods reach the destination.
C)when goods are shipped.
D)when the buyer unpacks the goods.

Answer 2

C

Question 3

Jackie's Online Service on April 30 has the following account balances: If net purchases for the period are $14,000, what is the amount of gross purchases?

A)$18,500
B)$15,500
C)$17,500
D)$16,500

Answer 3

C

Question 4

Net purchases are:

A)Purchases + Purchases Returns and Allowances.
B)Purchases - Purchases Discount - Purchases Returns and Allowances.
C)Purchases - Freight - Purchases Returns and Allowances.
D)Purchases + Freight-in.

Question 5

If a display rack was purchased for the store, which of the following accounts would be increased?

A)Store Equipment
B)Purchases
C)Cash
D)Capital

Question 6

Purchases Discount:

A)is a contra-cost account.
B)has a normal debit balance.
C)decreases Net Income.
D)All of the above are correct.

Question 7

A cost account is treated the same as:

A)an asset.
B)Capital.
C)a revenue.
D)an expense.

Question 8

Clothes' R Us bought some new clothes for its fashion line and is required to pay the freight costs. The freight terms are:

A)F.O.B. destination.
B)F.O.B. shipping point.
C)3/10, n/30.
D)None of these are correct.

Question 9

F.O.B. shipping point means:

A)the buyer pays for the freight.
B)the seller pays for the freight.
C)the title passes at time of shipment.
D)Both A and C are correct.

Question 10

A form used with a business by the requesting department asking the purchasing department to buy specific goods is called a:

A)purchase order.
B)purchase requisition.
C)purchase invoice.
D)debit memorandum.

Question 11

The term F.O.B. means:

A)free on board.
B)freight or bill.
C)freight order billing.
D)found on base.

Question 12

When merchandise is bought for resale, which of the following accounts would be decreased?

A)Store Equipment
B)Purchases
C)Cash
D)Capital

Question 13

A characteristic of Purchases Returns and Allowances is:

A)it has a normal credit balance.
B)it increases when merchandise is returned.
C)it decreases cost.
D)All of the above are correct.

Question 14

Jackie's Online Service on April 30 has the following account balances: Net purchases for the period are:

A)$10,600.
B)$9,600.
C)$12,600.
D)$14,000.

Question 15

On November 30, Janoch's Dog Kennel purchased $600 of merchandise on account from the Ganster Company. The goods were shipped F.O.B. shipping point. The freight charge of $40 was paid by Ganster Company and added to the invoice. The amount to record in the Purchases account is:

A)$600.
B)$640.
C)$560.
D)$550.

Question 16

The entry to record a purchase of $5,000 on account, terms of 2/10, n/30, would include a:

A)debit to Purchases Discount for $100.
B)credit to Accounts Payable for $5,000.
C)debit to Accounts Payable for $5,000.
D)credit to Cash for $5,000.

Question 17

Purchases is a(n):

A)cost.
B)asset.
C)liability.
D)revenue.

Question 18

Purchase Discounts are taken on:

A)shipping expense.
B)Purchases Returns and Allowances.
C)Purchases.
D)All of the above are correct.

Question 19

Before paying an invoice, the accounting department must check:

A)the purchase order.
B)the invoice.
C)the receiving report.
D)All of the above are correct.

Question 20

Jackie's Online Service on April 30 has the following account balances: If net purchases for the period are $11,000, what is the amount in the Purchases Discounts account?

A)$3,000
B)$4,000
C)2,000
D)$1,000

Question 21

The freight paid on goods purchased F.O.B. Shipping Point was not recorded. This error will cause:

A)net income to be overstated.
B)net income to be understated.
C)net income to not be affected.
D)total liabilities to be overstated.

Question 22

A form used in business to place an order for the buying of goods from a seller is:

A)purchase requisition.
B)purchase order.
C)purchase discount.
D)purchases returns.

Question 23

Purchases discounts:

A)decrease net income.
B)increase net income.
C)have no effect on net income.
D)Not enough information provided.

Question 24

The return of merchandise was recorded as a debit to Accounts Receivable and a credit to Purchases Returns and Allowances. This error will cause:

A)net income to be overstated.
B)net income to be understated.
C)total liabilities to be understated.
D)total assets to be overstated.

Question 25

Which of the following transactions will cause a liability to be credited and a cost account to be debited when the periodic inventory system is in use?

A)Recorded the adjustment for depreciation
B)Recorded the adjustment for the consumption of supplies
C)Purchased merchandise inventory on account
D)Purchased office supplies on account

Question 26

Which of the following transactions will cause one asset to be debited and another to be credited when the periodic inventory system is in use?

A)Purchased merchandise on account
B)Purchased merchandise for cash.
C)Purchased office supplies for cash
D)Purchased office supplies on account

Question 27

Heidi's Accessories bought 50 necklaces for $10 each on account. The invoice included a 6% sales tax and payment terms of 2/10, n/30. In addition, 5 necklaces were returned prior to payment. The entry to record the purchase would include:

A)a debit to Accounts Payable for $530.
B)a debit to Accounts Payable for $500.
C)a debit to Purchases for $530.
D)a debit to Purchases for $500.

Question 28

A characteristic of Purchases is:

A)it has a debit normal balance.
B)it reduces net income.
C)that it is used to record the purchase of merchandise to be resold.
D)All of the above are correct.

Question 29

The term used when the purchaser is responsible for the cost of freight is:

A)F.O.B. shipping point.
B)F.O.B. destination.
C)Freight-In.
D)Purchases.

Question 30

Office Supplies (not used for resale)bought on account were returned for credit and recorded with a debit to Accounts Payable and a credit to Purchase Returns and Allowances. This error will cause:

A)net income to be overstated.
B)net income to be understated.
C)net income to not be affected.
D)total assets to be understated.

Question 31

Hardware Restoration had net purchases of $50,000. If Purchases Returns and Allowances are $10,000 and Purchases Discounts are $1,500, what are gross purchases?

A)$38,500
B)$50,000
C)$61,500
D)$40,000

Question 32

A purchase discount correctly taken was debited to Purchases at the time the entry was recorded. This error will cause:

A)net income to be overstated.
B)net income to be understated.
C)net income to not be affected.
D)total assets to be overstated.

Question 33

The Purchases Discount account normally has a debit balance and is a contra-cost account.

Question 34

The term used when the seller is responsible for the cost of freight is:

A)F.O.B. shipping point.
B)F.O.B. destination.
C)Freight-In.
D)Purchases.

Question 35

Purchases:

A)decrease net income.
B)increase net income.
C)have no effect on net income.
D)Not enough information provided.

Question 36

A purchase discount was recorded as a credit to the Purchases account and a debit to Accounts Payable. This error will cause:

A)net income to be overstated.
B)net income to be understated.
C)net income to not be affected.
D)total assets to be overstated.

Question 37

R&R Lumber reports Purchases of $60,000. If Purchases Returns and Allowances are $6,000 and Purchases Discounts are $1,500, what are the net Purchases?

A)$54,000
B)$52,500
C)$67,500
D)$58,500

Question 38

Purchases Returns and Allowances:

A)decrease net income.
B)increase net income.
C)have no effect on net income.
D)Not enough information provided.

Question 39

The account Freight-In accumulates the shipping costs to the seller.

Question 40

Purchased office supplies on account. This will be recorded with:

A)a debit to Accounts Payable and a credit to Supplies.
B)a debit to Supplies and a credit to Supplies Expense.
C)a debit to Supplies and a credit to Accounts Payable.
D)a credit to Supplies and a debit to Purchases.

Question 41

A receiving report is used to notify the company of the quantity and condition of the goods received.

Question 42

Which of the following accounts is a contra-cost account?

A)Accumulated Depreciation
B)Purchases Returns and Allowances
C)Sales Returns and Allowances
D)Sales Discount

Question 43

When the terms are F.O.B. shipping point, the buyer is responsible for the cost of shipping from the seller's shipping point to the purchaser's location but the title does not pass until it is delivered.

Question 44

Purchase discounts are given to the buyer from the supplier for early payment on account.

Question 45

A debit memorandum decreases which account on the seller's books?

A)Accounts Payable
B)Purchases Returns and Allowances
C)Sales Returns and Allowances
D)Accounts Receivable

Question 46

Explain the difference between F.O.B. shipping point and F.O.B. destination.

Question 47

On February 12, Clare purchased $400 of merchandise on account from Larsen's Accessories, terms 2/10, n/30. The goods were shipped F.O.B. destination. The freight charge was $40. The amount to be recorded in the Accounts Payable Subsidiary ledger is:

A)$392.
B)$408.
C)$400.
D)$440.

Question 48

Purchases Discounts are not taken on freight costs.

Question 49

An entry to record the payment to a vendor was correctly recorded and posted to the general ledger but was not posted to the subsidiary ledger. This error will cause:

A)net income to be overstated.
B)net income to be understated.
C)the accounts payable control account to not agree with the subsidiary ledger.
D)the accounts receivable control account to not agree with the subsidiary ledger.

Question 50

An invoice approval form is used by accounting to check the invoice before approving it for payment.

Question 51

The Purchases Returns and Allowances account normally has a credit balance.

Question 52

A debit memorandum increases which account on the seller's books?

A)Accounts Payable
B)Purchases Returns and Allowances
C)Sales Returns and Allowances
D)Accounts Receivable

Question 53

Payment for merchandise should not be made until approval is given.

Question 54

The normal balance for Purchases Returns and Allowances is:

A)a debit.
B)a credit.
C)It does not have a normal balance.
D)zero.

Question 55

Tyler returned $500 of merchandise within the discount period. The entry to record the return is to:

A)debit Purchases for $500; credit Accounts Payable for $500.
B)debit Purchases for $500; credit Purchases Returns and Allowances for $500.
C)debit Accounts Payable/Suppliers Name for $500; credit Purchases Returns and Allowances for $500.
D)debit to Accounts Payable for $500, credit Purchases Discount for $500.

Question 56

A debit memorandum increases which account on the buyer's books?

A)Accounts Payable
B)Purchases Returns and Allowances
C)Sales Returns and Allowances
D)Accounts Receivable

Question 57

The seller's sales invoice is the buyer's purchase invoice.

Question 58

A debit memorandum decreases which account on the buyer's books?

A)Accounts Payable
B)Purchases Returns and Allowances
C)Sales Returns and Allowances
D)Accounts Receivable

Question 59

The entry to record returned merchandise to Vans Company is:

A)debit Purchases Returns and Allowances; credit Accounts Payable in the general ledger.
B)debit Accounts Payable; credit Purchases.
C)debit Accounts Payable/Vans Company in the accounts payable subsidiary ledger and debit Accounts Payable in the general ledger; credit Purchases Returns and Allowances.
D)debit Purchases; credit Accounts Payable.

Question 60

On September 6, Mark purchased merchandise for his electric store. The invoice was for $35,000 plus freight of $750, terms 2/15, n/30. The freight was included on the invoice. On September 10, Mark returned merchandise for $5,000 credit. On September 19, Mark paid the amount owed. Fill in the blanks below.
a)The credit to Accounts Payable on September 6 is ________.
b)The debit to Freight-In on September 6 is ________.
c)The debit to Accounts Payable on September 10 is ________.
d)The credit to Purchases Discount on September 19 is ________.
e)The credit to Cash on September 19 is ________.

Question 61

Determine the amount of credit to be earned on a full return of merchandise purchased with an invoice price of $5,000 and credit terms of 2/10, n/30 when full payment was made within the discount period.
$ ________

Question 62

Jackson purchased $500 of goods and received credit terms of 2/10, n/30. How much did he pay if payment was made during the discount period?

A)$450
B)$510
C)$500
D)$490

Question 63

Individual amounts are recorded during the month to the accounts payable ledger.

Question 64

Medeco bought goods for $250 on credit. Medeco returned $50 worth of goods. Terms of the sale were 2/10, n/30. If Medeco pays the amount owed within the discount period, what is the amount they should pay?

A)$250
B)$204
C)$196
D)$200

Question 65

If a debit memorandum is issued, the buyer will reduce their accounts receivable.

Question 66

Returned merchandise paid for within the discount period for a Cash refund. This will be recorded with:

A)a credit to a liability.
B)a credit to an asset.
C)a debit to a liability.
D)a debit to an asset.

Question 67

Journalize the following transactions. All purchases are on account and subject to terms of 2/10, n/30. The periodic inventory method is used.

Journalize the Nov. 3 transaction.

Question 68

Journalize the following transactions. All purchases are on account and subject to terms of 2/10, n/30. The periodic inventory method is used.

Journalize the Nov. 5 transaction.

Question 69

Journalize the following transactions. All purchases are on account and subject to terms of 2/10, n/30. The periodic inventory method is used.

Journalize the Nov. 7 transaction.

Question 70

The entry to record a payment on a $600 account within the 2% discount period would include a:

A)debit to Accounts Payable for $588.
B)debit to Accounts Payable for $600.
C)credit to Purchases for $588.
D)debit to Cash for $600.

Question 71

Journalize the following transactions. All purchases are on account and subject to terms of 2/10, n/30. The periodic inventory method is used.

Journalize the Nov. 10 transaction.

Question 72

Heidi's Accessories bought 50 necklaces for $10 each on account. The invoice included a 6% sales tax and payment terms of 2/10, n/30. In addition, 5 necklaces were returned prior to payment. The entry to record the return would include:

A)a debit to Accounts Payable for $50.00.
B)a debit to Accounts Payable for $53.00.
C)a debit to Purchases Returns and Allowances for $50.00.
D)a debit to Purchases Returns and Allowances for $53.00.

Question 73

Determine the amount to be paid within the discount period for purchase with an invoice price of $5,000 and credit terms of 2/10, n/30 when $500 has already been returned for credit.
$ ________

Question 74

Determine the total cost of a purchase paid for within the discount period with an invoice price of $7,000 and credit terms of 2/10, n/30 when $1,500 has already been returned for credit. The goods were purchased with freight terms of F.O.B shipping point and freight of $50.
$ ________

Question 75

Returned merchandise under the periodic inventory method. This will be recorded with:

A)a debit to Accounts Payable and a credit to Purchases Returns and Allowances.
B)a debit to Merchandise Inventory and a credit to Purchases.
C)a credit to Accounts Payable and a debit to Merchandise Inventory.
D)a debit to Accounts Payable and a credit to Merchandise Inventory.

Question 76

Determine the amount to be paid within the discount period for purchase with an invoice price of $10,000, subject to credit terms of 2/10, n/30.
$ ________

Question 77

The buyer issues a debit memorandum to indicate that a previous purchase amount is being reduced because goods were returned or an allowance was requested.

Question 78

Determine the amount to be paid to the vendor within the discount period for purchase with an invoice price of $3,000 and credit terms of 2/10, n/30 when $700 has already been returned for credit. The goods were purchased with freight terms of F.O.B shipping point and freight of $50 was included on the invoice.
$ ________

Question 79

On June 15, Paradise Park purchased merchandise for the race track.. The invoice was for $4,500, terms 2/10, n/30. On June 20, Paradise Park returned $200 of merchandise for credit. On June 25, it paid the amount owed. Fill in the blanks below.
a)The debit to Purchases on June 15 is ________.
b)The credit to Accounts Payable on June 15 is ________.
c)The credit to Purchases Returns and Allowances on June 20 is ________.
d)The credit to Cash on June 25 is ________.
e)The credit to Purchases Discount on June 25 is ________.

Question 80

Heidi's Accessories bought 50 necklaces for $10 each on account. The invoice included a 6% sales tax and payment terms of 2/10, n/30. In addition, 5 necklaces were returned prior to payment. The entry to record the payment (within the discount period)would include:

A)a credit to Cash for $477.
B)a credit to Cash for $468.
C)a credit to Accounts Receivable for $477.
D)a credit to Accounts Receivable for $468.