Question 1

The collection of a $6,000 account within the 2 percent discount period will result in a
A) debit to Sales Discounts for $120.
B) debit to Accounts Receivable for $5,880.
C) credit to Cash for $5,880.
D) credit to Accounts Receivable for $5,880.

Accepted Answer

The answer of The collection of a $6,000 account within...

Question 2

Under the perpetual system, freight costs incurred by the buyer for the transporting of goods is recorded in
A) Freight Expense.
B) Freight - In.
C) Inventory. d Freight - Out.

Accepted Answer

The answer of Under the perpetual system, freight costs incurred...

Question 3

McIntyre Company made a purchase of merchandise on credit from Marvin Company on August 8, for $9,000, terms 3/10, n/30. On August 17, McIntyre makes the appropriate payment to Marvin. The entry on August 17 for McIntyre Company is: a. 
$\begin{array}{lrr}
  \text {  Accounts Payable} &9,000\
 \text {Cash  } &&9,000\
\end{array}$

b. 
$\begin{array}{lrr}
  \text {Accounts Payable  } &8,730\
 \text { Cash } &&8,730\
\end{array}$

c. 
$\begin{array}{lrr}
  \text {  Accounts Payable} &9,000\
 \text { Purchase Returns and Allowances } &&270\
\end{array}$

$\begin{array}{lrr}
  \text {  MC. 73} &\text {(Cont.)  } &\
 \text {Cash}&&8,730
\end{array}$

d. 
$\begin{array}{lrr}
  \text { Accounts Payable } &9,000\
 \text {  Inventory} &&270\
 \text {  Cash} &&8,730
\end{array}$

Accepted Answer

The answer of McIntyre Company made a purchase of merchandise...

Question 4

In a perpetual inventory system, the amount of the discount allowed for paying for merchandise purchased within the discount period is credited to
A) Inventory.
B) Purchase Discounts.
C) Purchase Allowance.
D) Sales Discounts.

Accepted Answer

The answer of In a perpetual inventory system, the amount...

Question 5

If a company is given credit terms of 2/10, n/30, it should
A) hold off paying the bill until the end of the credit period, while investing the money at 10% annual interest during this time.
B) pay within the discount period and recognize a savings.
C) pay within the credit period but don't take the trouble to invest the cash while waiting to pay the bill.
D) recognize that the supplier is desperate for cash and withhold payment until the end of the credit period while negotiating a lower sales price.

Accepted Answer

The credit terms of 2/10, n/30 means that the company can get a 2% discount if they pay the bill within 10 days, otherwise, they need to pay the invoice within 30 days. Therefore, the best choice for the company is to pay within the discount period and take advantage of the savings. This will improve the company's cash flow and reduce the cost of the purchase. Option A is not recommended as investing the money at 10% interest is not guaranteed and therefore, poses a risk. Option C is also not recommended as the company would miss out on the discount, and option D is unethical and could damage the relationship with the supplier.

Question 6

The entry to record the receipt of payment within the discount period on a sale of $2,000 with terms of 2/10, n/30 will include a credit to
A) Sales Discounts for $40.
B) Cash for $1,960.
C) Accounts Receivable for $2,000.
D) Sales Revenue for $2,000.

Accepted Answer

The answer of The entry to record the receipt of...

Question 7

On November 2, 2014, Kasdan Company has cash sales of $6,000 from merchandise having a cost of $3,600. The entries to record the day's cash sales will include:
A) a $3,600 credit to Cost of Goods Sold.
B) a $6,000 credit to Cash.
C) a $3,600 credit to Inventory. d a $6,000 debit to Accounts Receivable.

Accepted Answer

The entry to record the cost of goods sold involves debiting Cost of Goods Sold and crediting Inventory for $3,600, reflecting the reduction in inventory.

Question 8

Costner's Market recorded the following events involving a recent purchase of merchandise: Received goods for $40,000, terms 2/10, n/30.
Returned $800 of the shipment for credit.
Paid $200 freight on the shipment.
Paid the invoice within the discount period.
As a result of these events, the company's inventory
A) increased by $38,416.
B) increased by $38,612.
C) increased by $38,616.
D) increased by $39,400.

Accepted Answer

The net amount after the discount can be calculated as: 
$40000 - ($40000 * 2%) = $39200
Then adding the freight of $200, the total cost is $39400
After returning $800 of merchandise, the final cost of the inventory is $38600
Therefore, the inventory increased by $38616 ($38600 + $16 credit for returned merchandise).

Question 9

Glenn Company purchased merchandise inventory with an invoice price of $9,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Glenn Company pays within the discount period?
A) $8,100
B) $8,280
C) $8,820
D) $9,000

Accepted Answer

The answer of Glenn Company purchased merchandise inventory with an...

Question 10

Jake's Market recorded the following events involving a recent purchase of merchandise: Received goods for $60,000, terms 2/10, n/30.
Returned $1,200 of the shipment for credit.
Paid $300 freight on the shipment.
Paid the invoice within the discount period.
As a result of these events, the company's inventory increased by
A) $57,624.
B) $57,918.
C) $57,924.
D) $59,100.

Accepted Answer

The amount paid after the discount is: $60,000 - ($60,000 x 2%) = $58,800
The returned amount is deducted from the original cost: $60,000 - $1,200 = $58,800
The freight cost is added to the cost: $58,800 + $300 = $59,100
Therefore, the inventory increased by $59,100.

Question 11

Glover Co. returned defective goods costing $5,000 to Mal Company on April 19, for credit. The goods were purchased April 10, on credit, terms 3/10, n/30. The entry by Glover Co. on April 19, in receiving full credit is: a. 
$\begin{array}{lrr}
  \text {  Accounts Payable} &5,000\
 \text {  Inventory } &&5,000\
\end{array}$

b. 
$\begin{array}{lrr}
  \text {  Accounts Payable} &5,000\
 \text {  Inventory } &150\
 \text { Cash } &&5,150
\end{array}$

c. 
$\begin{array}{lrr}
  \text { Accounts Payable } &5,000\
 \text {  Purchase Discounts}&&120 \
 \text {   Inventory} &&4,850\
\end{array}$

d. 
$\begin{array}{lrr}
  \text {Accounts Payable  } &5,000\
 \text {  Inventory } &&120\
 \text { Cash } &&4,850
\end{array}$

Accepted Answer

The answer of Glover Co. returned defective goods costing $5,000...

Question 12

Freight costs paid by a seller on merchandise sold to customers will cause an increase
A) in the selling expense of the buyer.
B) in operating expenses for the seller.
C) to the cost of goods sold of the seller.
D) to a contra-revenue account of the seller.

Accepted Answer

Freight costs paid by a seller on merchandise sold to customers are considered part of the selling expenses, which are a component of the operating expenses for the seller. These costs are not directly related to the production (cost of goods sold) nor are they considered a contra-revenue account or an expense of the buyer.

Question 13

Cleese Company sells merchandise on account for $5,000 to Langston Company with credit terms of 2/10, n/30. Langston Company returns $1,000 of merchandise that was damaged, along with a check to settle the account within the discount period. What is the amount of the check?
A) $3,920
B) $4,000
C) $4,900
D) $4,920

Accepted Answer

The answer of Cleese Company sells merchandise on account for...

Question 14

Scott Company purchased merchandise with an invoice price of $3,000 and credit terms of 1/10, n/30. Assuming a 360 day year, what is the implied annual interest rate inherent in the credit terms?
A) 20%
B) 24%
C) 18%
D) 36%

Accepted Answer

The answer of Scott Company purchased merchandise with an invoice...

Question 15

Company X sells $900 of merchandise on account to Company Y with credit terms of 2/10, n/30. If Company Y remits a check taking advantage of the discount offered, what is the amount of Company Y's check?
A) $630
B) $720
C) $810
D) $882

Accepted Answer

The answer of Company X sells $900 of merchandise on...

Question 16

On July 9, Sheb Company sells goods on credit to Wooley Company for $5,000, terms 1/10, n/60. Sheb receives payment on July 18. The entry by Sheb on July 18 is: a. 
$\begin{array}{lrr}
  \text {Cash  } &5,000\
 \text { Accounts Receivable } &&5,000\
\end{array}$

b. 
$\begin{array}{lrr}
  \text {Cash  } &5,000\
 \text {Sales Discounts  } &&50\
 \text { Accounts Receivable } &&4,950\
\end{array}$

c. 
$\begin{array}{lrr}
  \text { Cash } &4,950\
 \text { Sales Discounts } &50\
 \text { Accounts Receivable } &&5,000\
\end{array}$

d.
$\begin{array}{lrr}
  \text {  Cash} &5,050\
 \text {  Sales Discounts} &&50\
 \text {  Accounts Receivable} &&5,000\
\end{array}$

Accepted Answer

The answer of On July 9, Sheb Company sells goods...

Question 17

A credit sale of $4,000 is made on April 25, terms 2/10, n/30, on which a return of $250 is granted on April 28. What amount is received as payment in full on May 4?
A) $3,675
B) $3,750
C) $3,920 d $4,000

Accepted Answer

The net amount of the credit sale is $4,000 - $250 = $3,750.
The discount period is within 10 days of the invoice date, so the buyer can take a discount of 2% on the net amount.
The payment due date is 30 days from the invoice date, so if the buyer does not take the discount, the full net amount is due within 30 days.
If the buyer takes the discount, the payment due is the net amount minus the discount.
If the buyer returns goods, the return is deducted from the gross amount before calculating the payment due.

Here are the different scenarios:

- If the buyer pays within 10 days and takes the discount:
Payment = $3,750 - (2% x $3,750) = $3,675
- If the buyer pays within 10 days but does not take the discount:
Payment = $3,750
- If the buyer pays after 10 days but within 30 days and does not take the discount:
Payment = $3,750
- If the buyer pays after 10 days but within 30 days and takes the discount:
Payment = $3,675
- If the buyer returns goods and pays within 10 days:
Payment = $4,000 - $250 - (2% x ($4,000 - $250)) = $3,920
- If the buyer returns goods and pays after 10 days but within 30 days:
Payment = $4,000 - $250 = $3,750

Based on the given information, the buyer granted a return on April 28 (within the discount period), and the payment in full was received on May 4 (within the credit period but after the discount period). Therefore, the payment due is the net amount after the return and without the discount: $3,750 - $250 = $3,500. Since this payment is made within the credit period but after the discount period, the buyer cannot take the discount. Hence, the correct answer is A) $3,675.

Question 18

Paden Company purchased merchandise from Emmett Company with freight terms of FOB shipping point. The freight costs will be paid by the
A) seller.
B) buyer.
C) transportation company.
D) buyer and the seller.

Accepted Answer

With FOB shipping point terms, the buyer is responsible for paying the freight costs.

Question 19

A buyer would record a payment within the discount period under a perpetual inventory system by crediting
A) Accounts Payable.
B) Inventory.
C) Purchase Discounts.
D) Sales Discounts.

Accepted Answer

The answer of A buyer would record a payment within...

Question 20

If a purchaser using a perpetual system agrees to freight terms of FOB shipping point, then the
A) Inventory account will be increased.
B) Inventory account will not be affected.
C) seller will bear the freight cost.
D) carrier will bear the freight cost.

Accepted Answer

Under FOB shipping point terms, the buyer is responsible for the freight costs, and these costs are typically added to the inventory account, increasing its value.

Quiz 5: Accounting for Merchandising Operations

The collection of a $6,000 account within the 2 percent discount period will result in a

Under the perpetual system, freight costs incurred by the buyer for the transporting of goods is recorded in

In a perpetual inventory system, the amount of the discount allowed for paying for merchandise purchased within the discount period is credited to

If a company is given credit terms of 2/10, n/30, it should

The entry to record the receipt of payment within the discount period on a sale of $2,000 with terms of 2/10, n/30 will include a credit to

On November 2, 2014, Kasdan Company has cash sales of $6,000 from merchandise having a cost of $3,600. The entries to record the day's cash sales will include:

Glenn Company purchased merchandise inventory with an invoice price of $9,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Glenn Company pays within the discount period?

Freight costs paid by a seller on merchandise sold to customers will cause an increase

Cleese Company sells merchandise on account for $5,000 to Langston Company with credit terms of 2/10, n/30. Langston Company returns $1,000 of merchandise that was damaged, along with a check to settle the account within the discount period. What is the amount of the check?

Scott Company purchased merchandise with an invoice price of $3,000 and credit terms of 1/10, n/30. Assuming a 360 day year, what is the implied annual interest rate inherent in the credit terms?

Company X sells $900 of merchandise on account to Company Y with credit terms of 2/10, n/30. If Company Y remits a check taking advantage of the discount offered, what is the amount of Company Y's check?

A credit sale of $4,000 is made on April 25, terms 2/10, n/30, on which a return of $250 is granted on April 28. What amount is received as payment in full on May 4?

Paden Company purchased merchandise from Emmett Company with freight terms of FOB shipping point. The freight costs will be paid by the

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

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