Question 1

Music,Inc.uses a periodic inventory system when recording its purchases and sales of inventory.If the business returns $1,000 of damaged goods to its supplier,select the correct entry to record the return:
A)

B)

C)

D)

Accepted Answer

The answer of Music,Inc.uses a periodic inventory system when recording...

Question 2

Hugh Snow returned merchandise to Farley Co.The entry on Hugh Snow's books to record the return of merchandise to Farley Co.would include a:
A) Debit Accounts Payable
B) Credit to Purchase Returns and Allowances
C) Debit to Account Receivable
D) Debit Sales Returns and Allowances

Accepted Answer

Whenever merchandise is returned to the supplier, the company needs to record a credit to Purchase Returns and Allowances account. This account is used to keep track of the returns of goods to the supplier. The company does not owe any money to the supplier for the returned merchandise, so there is no need to debit Accounts Payable or Account Receivable. Also, there is no need to debit Sales Returns and Allowances because the sales transaction has already been completed.

Question 3

Check marks next to the individual amounts in the purchases journal mean that the amounts
A) have been posted to the general ledger.
B) have been posted to the accounts payable subsidiary ledger.
C) have been posted to the accounts receivable subsidiary ledger.
D) do not need to be posted to any account.

Accepted Answer

Check marks next to the individual amounts in the purchases journal indicate that these amounts have been posted to the accounts payable subsidiary ledger.

Question 4

A creditor's account in the accounts payable ledger has a balance of $10,560 as of April 1.After a transaction of $12,800 is posted from the purchases journal and a transaction of $9,200 is posted from the cash payments journal,the balance of the creditor's account on April 30 is:
A) $9,200 debit
B) $6,960 credit
C) $14,160 credit
D) $12,800 debit

Accepted Answer

The initial balance of the creditor's account in the accounts payable ledger is $10,560.

After a transaction of $12,800 is posted from the purchases journal, the balance of the account becomes $23,360 ($10,560 + $12,800).

After a transaction of $9,200 is posted from the cash payments journal, the balance of the account becomes $14,160 ($23,360 - $9,200).

Therefore, the balance of the creditor's account on April 30 is $14,160 credit (meaning the creditor owes the business $14,160).

Question 5

The type of account and normal balance of Purchase Returns and Allowances is a(n)
A) contra-revenue account,credit balance.
B) asset account,debit balance.
C) contra-cost of goods sold account,credit balance.
D) expense account,credit balance.

Accepted Answer

Purchase Returns and Allowances is a contra-cost of goods sold account with a credit balance, as it reduces the total cost of goods sold by accounting for returned or discounted purchases.

Question 6

Tune Tones Instrument Tuning Company owes Mandy Lynn's Music Studio $4,856 as of November 1.During November Tune Tones purchased merchandise from Mandy Lynn totaling $8,495 and made payments on account to Mandy Lynn in the amount of $7,250.The amount Tune Tones owes Mandy Lynn on November 30 is:
A) $6,101
B) $3,611
C) $10,889
D) $7,250

Accepted Answer

The amount owed on November 1 was $4,856. Purchases during November were $8,495, making the total owed $13,351. Payments made were $7,250, so the remaining balance is $13,351 - $7,250 = $6,101.

Question 7

In a firm that uses special journals,the purchase of merchandise for cash is recorded in the
A) cash payments journal.
B) cash receipts journal.
C) purchases journal.
D) general journal.

Accepted Answer

The purchase of merchandise for cash is a cash transaction, so it would be recorded in the cash payments journal. The purchases journal is used to record credit purchases, whereas the cash receipts journal is used to record cash sales. The general journal is used for all other types of transactions that do not fit into a specific special journal.

Question 8

Postings to the accounts payable ledger should be made
A) daily.
B) weekly.
C) monthly.
D) at the end of the fiscal period.

Accepted Answer

Postings to the accounts payable ledger should be made daily to ensure that the ledger is up-to-date and accurate. This also helps in timely payments to vendors and avoids any potential errors or discrepancies in the accounts payable balance.

Question 9

The journal entry to record the purchase of merchandise on account for $2,750 with freight of $125 prepaid by their supplier and added to the invoice is:
A) debit Purchases $2,750;credit Accounts Payable $2,750
B) debit Accounts Payable $2,875,debit Freight in $125;credit Purchases $2,750
C) debit Purchases $2,750,debit Freight In $125;credit Accounts Payable $2,875
D) debit Accounts Receivable $2,875;credit Sales $2,875

Accepted Answer

The purchase of merchandise on account should include both the cost of the merchandise and the freight cost. Therefore, debit Purchases for $2,750 and Freight In for $125, and credit Accounts Payable for the total amount of $2,875.

Question 10

Best Value Furniture uses the periodic inventory system to account for its inventory.It purchased $2,000 of goods from its supplier but later returned $400 of the goods due to damage.Best Value would record the return by:
A) debiting Accounts Payable,crediting Purchases
B) debiting Sales Returns and Allowances,crediting Accounts Receivable
C) debiting Accounts Payable,crediting Purchases Purchase Returns and Allowances
D) debiting Purchase Returns and Allowances,crediting Accounts Payable

Accepted Answer

The answer of Best Value Furniture uses the periodic inventory...

Question 11

To record a return of merchandise purchased on credit on the books of the buyer,the accountant would
A) debit Purchases Returns and Allowances and credit Accounts Receivable.
B) debit Purchases Returns and Allowances and credit Purchases.
C) debit Accounts Payable and credit Purchases Returns and Allowances.
D) debit Purchases and credit Purchases Returns and Allowances.

Accepted Answer

When merchandise is returned, the buyer reduces their liability by debiting Accounts Payable and recognizes the return by crediting Purchases Returns and Allowances.

Question 12

The amount of the purchases for a period is presented in
A) the balance sheet.
B) the income statement.
C) the statement of owner's equity.
D) the cost of purchases statement.

Accepted Answer

The amount of purchases for a period is an expense and would be included in the income statement. The balance sheet shows the assets, liabilities, and equity of a company at a specific point in time; the statement of owner's equity shows changes in the owner's equity during a period; and the cost of purchases statement is not a commonly used financial statement.

Question 13

Which of the following statements is correct?
A) Freight In is subtracted from Purchases to arrive at delivered cost of purchases.
B) Another name that may be used for the Freight In account is "Transportation In."
C) Freight charges that are listed on the invoice received from a supplier are not part of the total credit to Accounts Payable to record the credit purchase.
D) The Freight In account is subtracted from Sales to get Net Sales.

Accepted Answer

Freight In and Transportation In are both names used for the account that records the cost of transporting goods purchased. Option A is incorrect because Freight In is added to Purchases to arrive at the cost of goods purchased. Option C is incorrect because freight charges included on the supplier's invoice are part of the total credit purchase and should be recorded in the Accounts Payable account. Option D is incorrect because Freight In is added to Purchases to get the cost of goods purchased, not subtracted from Sales to arrive at net sales.

Question 14

A creditor's account in the accounts payable ledger has a $1,600 beginning balance.After a transaction for $700 is posted from the purchases journal,the balance of the creditor's account is
A) $2,300 debit.
B) $900 credit.
C) $2,300 credit.
D) $900 debit.

Accepted Answer

The beginning balance is $1,600 credit. After posting a $700 purchase, the balance increases to $2,300 credit.

Question 15

Nice Guys Apparel received a $200 credit memorandum as an allowance for goods that it returned to one of its suppliers.Identify the statement below that would be correct when posting the transaction.
A) A debit of $200 would be posted to the supplier's account in the accounts payable ledger.
B) A debit of $200 would be posted to the supplier's account in the accounts receivable ledger.
C) A credit of $200 would be posted to the Accounts Receivable account in the general ledger.
D) A credit of $200 would be posted to the Purchases account in the general ledger.

Accepted Answer

When a company receives a credit memorandum from a supplier, it means that the supplier is allowing the company to return goods and receive a credit towards their accounts payable balance. Therefore, the transaction should be recorded with a debit to the supplier's account in the accounts payable ledger.

Question 16

The journal entry to record the purchase on account of $900 of merchandise with freight of $65 prepaid by their supplier and added to the invoice is:
A) debit Purchases $965;credit Accounts Payable $965
B) debit Accounts Payable $965,debit Freight in $65;credit Purchases $900
C) debit Purchases $900,debit Freight In $65;credit Accounts Payable $965
D) debit Accounts Receivable $965;credit Sales $965

Accepted Answer

The journal entry for a purchase on account includes a debit to Purchases for the cost of the merchandise and a separate debit to Freight In for any freight charges prepaid by the supplier and added to the invoice. The total amount due is then credited to Accounts Payable. Therefore, choice C is the correct option. Option A does not account for the prepaid freight and option B debits the wrong account. Option D is not relevant to the transaction as it is a sale, not a purchase.

Question 17

A firm had purchases of $16,200,freight charges of $300,and purchases returns and allowances of $1,100 during one month.Its net delivered cost of purchases was
A) $14,800.
B) $17,600.
C) $16,200.
D) $15,400.

Accepted Answer

Net delivered cost of purchases = purchases + freight charges - purchases returns and allowances
= $16,200 + $300 - $1,100
= $15,400

Question 18

Credit terms of 1/10,n/30 mean that
A) payment in full is due 10 days after date of the invoice.
B) a 1% discount may be taken for up to 30 days.
C) if the invoice is paid within 10 days of its date,a 1% discount may be taken;otherwise the total amount is due in 20 days.
D) if the invoice is paid within 10 days of its date,a 1% discount may be taken;otherwise the total amount is due in 30 days.

Accepted Answer

The terms 1/10, n/30 mean that a 1% discount is available if the invoice is paid within 10 days; otherwise, the full amount is due in 30 days.

Question 19

In a firm that uses special journals,the receipt of a credit memorandum from a supplier for merchandise that was damaged but can be sold at a reduced price is recorded in the
A) cash payments journal.
B) cash receipts journal.
C) purchases journal.
D) general journal.

Accepted Answer

A credit memorandum for damaged merchandise that can still be sold at a reduced price is a non-routine transaction and is recorded in the general journal.

Question 20

The total of the balances in the individual creditor's accounts should agree with the balance of
A) the Purchases account in the general ledger.
B) the Accounts Receivable account in the general ledger.
C) the Accounts Payable account in the general ledger.
D) the Sales account in the general ledger.

Accepted Answer

The total of the balances in the individual creditor's accounts should agree with the balance of the Accounts Payable account in the general ledger, as creditors are liabilities representing amounts owed to suppliers.

Quiz 8: Accounting for Purchases and Accounts Payable

Music,Inc.uses a periodic inventory system when recording its purchases and sales of inventory.If the business returns $1,000 of damaged goods to its supplier,select the correct entry to record the return:

Hugh Snow returned merchandise to Farley Co.The entry on Hugh Snow's books to record the return of merchandise to Farley Co.would include a:

Check marks next to the individual amounts in the purchases journal mean that the amounts

A creditor's account in the accounts payable ledger has a balance of $10,560 as of April 1.After a transaction of $12,800 is posted from the purchases journal and a transaction of $9,200 is posted from the cash payments journal,the balance of the creditor's account on April 30 is:

The type of account and normal balance of Purchase Returns and Allowances is a(n)

Tune Tones Instrument Tuning Company owes Mandy Lynn's Music Studio $4,856 as of November 1.During November Tune Tones purchased merchandise from Mandy Lynn totaling $8,495 and made payments on account to Mandy Lynn in the amount of $7,250.The amount Tune Tones owes Mandy Lynn on November 30 is:

In a firm that uses special journals,the purchase of merchandise for cash is recorded in the

Postings to the accounts payable ledger should be made

The journal entry to record the purchase of merchandise on account for $2,750 with freight of $125 prepaid by their supplier and added to the invoice is:

Best Value Furniture uses the periodic inventory system to account for its inventory.It purchased $2,000 of goods from its supplier but later returned $400 of the goods due to damage.Best Value would record the return by:

To record a return of merchandise purchased on credit on the books of the buyer,the accountant would

The amount of the purchases for a period is presented in

Which of the following statements is correct?

A creditor's account in the accounts payable ledger has a $1,600 beginning balance.After a transaction for $700 is posted from the purchases journal,the balance of the creditor's account is

Nice Guys Apparel received a $200 credit memorandum as an allowance for goods that it returned to one of its suppliers.Identify the statement below that would be correct when posting the transaction.

The journal entry to record the purchase on account of $900 of merchandise with freight of $65 prepaid by their supplier and added to the invoice is:

A firm had purchases of $16,200,freight charges of $300,and purchases returns and allowances of $1,100 during one month.Its net delivered cost of purchases was

Credit terms of 1/10,n/30 mean that

In a firm that uses special journals,the receipt of a credit memorandum from a supplier for merchandise that was damaged but can be sold at a reduced price is recorded in the

The total of the balances in the individual creditor's accounts should agree with the balance of