Question 1

When goods are returned that relate to a prior cash sale,

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Question 2

Sofia's Sodas purchased merchandise inventory with an invoice price of $2,000 and credit terms of 2/10, n/30.What is the net cost of the goods if Sofia's Sodas pays within the discount period?

Accepted Answer

The net cost of the goods can be found using the formula:
Net Cost = Invoice Price - (Invoice Price x Discount %)
Discount % = 2/100 = 0.02
Net Cost = $2,000 - ($2,000 x 0.02)
Net Cost = $1,960
Therefore, option B is the best choice as it is the correct net cost of the goods if Sofia's Sodas pays within the discount period.

Question 3

The freight cost incurred by a seller to deliver goods sold to a customer is called ________________.

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Question 4

Happy's Hot Dogs sells merchandise on account for $3,000 to Karen's Catering with credit terms of 2/10, n/30.Karen's Catering returns $500 of merchandise that was damaged, along with a check to settle the account within the discount period.What is the amount of the check?

Accepted Answer

The discount is 2% if paid within 10 days. The amount of the discount is $3,000 x 2% = $60. The amount of the check is $3,000 - $60 - $500 = $2,440.

Question 5

The journal entry to record a credit sale is

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Question 6

A Sales Returns and Allowances account is not debited if a customer

Accepted Answer

A Sales Returns and Allowances account is typically used to record returns or allowances made to customers for merchandise that is defective, not in accordance with specifications, or of inferior quality. However, if a customer utilizes a prompt payment incentive (such as a discount for paying early), this does not result in a return or allowance and therefore should not be recorded in the Sales Returns and Allowances account.

Question 7

If a purchaser using a perpetual system agrees to freight terms of FOB shipping point, then the

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Question 8

In preparing closing entries for a merchandiser, the Income Summary account will be credited for the balance of

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Question 9

Cost of goods sold is deducted from net sales revenue for the period in order to arrive at ________________.

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Question 10

Which of the following would not be classified as a contra account?

Accepted Answer

Sales is a revenue account and not a contra account. Contra accounts are used to reduce the balance of their related accounts, while revenue accounts increase the balance. Sales Returns and Allowances, Accumulated Depreciation, and Sales Discounts are all examples of contra accounts.

Question 11

The respective normal account balances of Sales, Sales Returns and Allowances, and Sales Discounts are

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Question 12

The operating cycle of a merchandiser is

Accepted Answer

The operating cycle of a merchandiser is generally shorter than it is for a service company, as merchandisers buy and sell inventory as their primary source of revenue, while service companies earn revenue from providing services, which typically have longer operating cycles.

Question 13

On December 1, 2008, ABC Linens sold merchandise which costs $400 on account to the Green Hotel Co.for $600 with terms of 3/10, n/30.ABC Linens uses a perpetual inventory system.The journal entry to record this transaction on ABC Linens' books will include:

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Question 14

As an incentive for customers to pay their accounts promptly, a business may offer its customers

Accepted Answer

Offering a sales discount is a common way to incentivize customers to pay their accounts promptly. This discount can be a percentage off the total amount owed or a fixed dollar amount. By offering this discount, customers are motivated to pay their accounts earlier, which improves the business's cash flow and reduces the risk of bad debts. The other options listed (B, C, and D) are not related to prompt payment and would not be effective as incentives.

Question 15

The Sales Returns and Allowances account is classified as a(n)

Accepted Answer

The Sales Returns and Allowances account is a contra revenue account because it has the opposite effect on revenue accounts. It is used to record returns, refunds, or allowances granted to customers for goods or services previously sold. By deducting from the revenue accounts, the net sales figure is obtained.

Question 16

A buyer would record a payment within the discount period under a perpetual inventory system by crediting

Accepted Answer

When a buyer records a payment within the discount period under a perpetual inventory system, they are eligible for a purchase discount. The purchase discount account is credited to record the discount received, reducing the overall cost of the inventory. Therefore, the correct answer is C) Purchase Discounts.

Question 17

Which of the following accounts has a normal credit balance?

Accepted Answer

Sales have a normal credit balance. This means that an increase in sales will result in a credit to the account, while a decrease in sales will result in a debit to the account.

Question 18

Tom's Steakhouse Company uses a perpetual inventory system.Meyer purchased inventory on account for $1,000.The credit terms are 2/10, n/60.The purchase will be recorded with the following journal entry:

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Question 19

When a customer returns merchandise purchased on credit, the retailer debits

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Question 20

Sales revenues are usually considered earned when

Accepted Answer

Sales revenue is earned when the goods have been delivered or transferred from the seller to the buyer. It is not dependent on the receipt of cash or the placement of an order. Adjusting entries are made at the end of an accounting period to ensure accurate financial reporting, but they do not affect the timing of when sales revenue is considered earned.

Quiz 8: Accounting for Merchandisingoperations in Hospitality